Question: EXERCISE 21 a. Identify at least two reasons why an accrual accounting income statement is more useful for analyzing business performance than a cash flow

EXERCISE 2–1

a. Identify at least two reasons why an accrual accounting income statement is more useful for analyzing business performance than a cash flow based income statement.

b. Describe what would be reported on the asset side of a cash flow based balance sheet versus the asset side of an accrual accounting balance sheet.

c. A strength of accrual accounting is its relevance for decision making. The strength of cash flow information is its reliability. Explain what makes accrual accounting more relevant and cash flows more reliable.

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