Accounting · Cash Flow Statement

Which of the following best explains why net profit and cash flow from operations may differ on financial statements?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1The cash flow statement completely excludes interest paid and received
2Accrual accounting recognizes revenues and expenses when earned or incurred, rather than when cash changes hands✓
3Non-cash revenues increase cash but not profit
4Depreciation expense reduces both profit and cash equally

Correct answer

Accrual accounting recognizes revenues and expenses when earned or incurred, rather than when cash changes hands

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