1. Which of the following statements is CORRECT? a. The income statement for a g

Question

1. Which of the following statements is CORRECT?

a. The income statement for a given year, say 2005, is designed to give us an idea of how much the firm earned during that year.

b. The focal point of the income statement is the cash account, because it cannot be manipulated by %u201Caccounting tricks.%u201D

c. The reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms follow Generally Accepted Accounting Principles (GAPP).

d. If a firm follows generally accepted accounting principles (GAPP), then its reported net income will be identical to its reported net cash flow.

Explanation / Answer

a) Income statement is earnings in a given year.

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