Question
In the 2001 Accounting Review journal article (set as one of your readings this semester and available on UTS Online ‘Course Documents'), "Accruals and the prediction of future cash flows" Barth, Cram & Nelson examine the role of accruals in ‘smoothing income' and how future cash flows might be predicted. What were two important findings or implications of this research? Explain why profits and cash flow from operations are not equal and what part do accruals play in this difference? (Students may find it useful to use some examples such as depreciation, payables, receivables, inventory etc to illustrate the last part of this question.)