Category: Accounting

  • A company reports strong net income but has negative operati…

    Answer: Revenue was recognized on credit, Under accrual accounting, a company records revenue the moment it delivers a product or completes a service, even if the customer has not paid yet.

    • Income Statement: Shows a sale (profit).
    • Cash Flow Statement: Shows no cash inflow.
    • Result: The sale is recorded as an increase in Accounts Receivable (money owed to the company) rather than Cash

    Requirements: