Final answer:
Both statements are correct. Statement I is correct because the accrual basis of accounting recognizes revenues when they are earned, regardless of when the actual cash is received. Statement II is correct because the cash from operating activities section of the cash flow statement represents the actual cash generated from the company's core operations.
Step-by-step explanation:
Statement I: The income statement is prepared under the accrual basis of accounting. This means that revenues may be recorded even if they have not yet been collected.
Statement II: The cash from operating activities of the cash flow statement is often compared to the company's net income.
Both statements are correct.
Statement I is correct because the accrual basis of accounting recognizes revenues when they are earned, regardless of when the actual cash is received. This allows for a more accurate representation of a company's financial performance.
Statement II is correct because the cash from operating activities section of the cash flow statement represents the actual cash generated from the company's core operations. It is often compared to the company's net income to assess its ability to generate cash from its day-to-day activities.