A company using accrual accounting may report revenue on the income statement even if it does not collect cash. this statement is

a company using accrual accounting may report revenue on the income statement even if it does not collect cash. this statement is

a company using accrual accounting may report revenue on the income statement even if it does not collect cash. this statement is

Answer: The statement you are referring to is: “A company using accrual accounting may report revenue on the income statement even if it does not collect cash.”

This statement is true and represents one of the fundamental principles of accrual accounting. In accrual accounting, revenue is recognized when it is earned, not necessarily when cash is received. This means that a company can recognize revenue on its income statement when it has performed a service, delivered a product, or completed a sale, even if it has not yet received payment from the customer.

Accrual accounting aims to match revenues and expenses to the periods in which they are incurred or earned, regardless of when the actual cash transactions occur. This provides a more accurate picture of a company’s financial performance by reflecting its economic activities in the accounting records. Later, when the cash is received, it will be recorded separately as a cash inflow in the cash flow statement.

In contrast, cash accounting recognizes revenue only when cash is received and expenses only when cash is paid, which can result in significant timing differences between when transactions occur and when they are recorded in the financial statements. Accrual accounting is generally considered more accurate for measuring a company’s ongoing financial performance.