Question

What can be determined by converting net income from an accrual basis to a cash basis under either the direct or indirect method:

A) Operating expenses
B) Net cash provided by goods sold
C) Gross sales revenue
D) Net cash provided by operating activities

Answer 1

Converting net income from an accrual basis to a cash basis allows us to determine Net cash provided by operating activities.

Step-by-step explanation:

Converting net income from an accrual basis to a cash basis can help determine Net cash provided by operating activities. This is because the conversion involves adjusting for non-cash items and timing differences that affect net income but do not impact cash flow from operating activities. By converting net income using either the direct or indirect method, we can isolate the cash flows generated from the core operations of the business.