Which Statement Correctly Explains the Relationship Between Cash Flows, Accruals

Which statement correctly explains the relationship between cash flows, accruals and reported earnings?

A) Cash flows are the best representation of a company's financial position and performance because of excessive accruals.
B) The cash basis of accounting provides the best representation of a company's financial position and performance.
C) The accrual basis of accounting provides the best representation of a company's financial position and performance.
D) Accruals reduce earnings quality but are needed in financial reporting because GAAP is founded on professional judgment.

Correct Answer:

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