Which of the Following Is a Reason Why Profits Based

Multiple Choice

Which of the following is a reason why profits based on an accrual-basis accounting system will differ from the firm's cash flows?

A) Sales reported in an income statement includes only cash sales rather than both cash and credit sales.
B) The depreciation expense shown in an income statement is an expense involving cash.
C) Cash spent for inventory doesn't represent all inventory purchases since some inventory is financed by credit.
D) On an income statement, profits are reported when cash is received, and expenses are recorded when they are paid.