A new manager of a retail company suggests that the company should prepare its Statement of Profit or Loss on the basis of cash receipts and cash expenditures (except for the acquisition of fixed assets, such as plant and equipment). He argues that managers, investors, creditors, and others are more interested in cash receipts and disbursements than in accrual-based accounting.
A new manager of a retail company suggests that the company should prepare its Statement of Profit or Loss on the basis of cash receipts and cash expenditures (except for the acquisition of fixed assets, such as plant and equipment). He argues that managers, investors, creditors, and others are more interested in cash receipts and disbursements than in accrual-based accounting.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A new manager of a retail company suggests that the company should prepare its
Statement of Profit or Loss on the basis of cash receipts and cash expenditures (except for
the acquisition of fixed assets, such as plant and equipment). He argues that managers,
investors, creditors, and others are more interested in cash receipts and disbursements
than in accrual-based accounting.
Do you think he is correct? Explain.
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