Stardate: 2853.0302. San Francisco, Eastern PacRim Zone.

Officer Motli Fool stared at Evil Empire, Inc.'s income statement. Somewhere in it lay a cosmic clue to the Marina swampland mystery. The feeling nagged at her, like a phantom hand tugging at her Yeoman's bars. Then she realized: It WAS a hand and it WAS grabbing her. She reeled with blinding speed on the three-inch heels of her Star Fleet standard issue Ladies' Activewear Boots, drew her phaser, and cracked off a quick burst of Stun in the direction of her assailant.

"Bones, what happened?" Kirk later muttered, prone atop the examining table. But before the medical officer could reply, Yeoman Fool spoke up. "I'm sorry Captain, it was just a reflex. You shouldn't sneak up on an intergalactic blonde like that."

"I'm glad to see your reflexes are as sharp as ever, Yeoman Fool. I never can get the jump on you." Kirk tried to sit up, but either the pain or the tightness of his one-piece uniform prevented it. "Bones, I've got an awful ache in my frontal lobes. How about a shot of that Sarian brandy you like to keep around?"

"Dammit, Jim! " McCoy said. "I'm a doctor, not a bartender."

Kirk rubbed his head. He looked at Yeoman Fool and smiled. "I hear you've uncovered a plot by Evil, Inc. to purchase the Marina swampland adjacent to Star Fleet headquarters. Command believes there's a connection between the land purchases, the failing tectonic dampeners around the Presidio, and the sudden rise in the price of dilithium."

"Why would Star Fleet Command think that, Captain?" asked the Yeoman.

Kirk continued. "It's all here in the income statement from your data link. Check the income sources - Evil Empire owns rental real estate, but its largest source of revenue is 'Sales.' The question is, sales of what, Yeoman?"

"Look, Captain," she said, giving him a knowing gaze, "see this? A line item for 'mining exploration.' That must have something to do with it."

"Probably some kind of clever tax scam," Kirk replied, "but we should find out what Star Fleet wants us to do with the information. Plus," he said, leaning up on his elbow, "the word in space is that Evil is experiencing a cash problem. Yet it looks like they've got plenty of revenue, according to this financial statement."

1) You can't always rely on financial statements to tell you the truth.

2) The cash flow information would be found on the balance sheet.

3) Because of accrual accounting, Evil, Inc. could have recorded sales without yet receiving payment.

4) The cash information most useful would be under "earnings," not "revenues."

The correct answer is 3.

Most businesses report earnings using the accrual principle of accounting. This means that sales revenues and related expenses are recorded when they are earned and incurred whether or not cash has been received or paid. Accrual basis accounting includes credit sales in the revenue line on the income statement and records them as accounts receivable in the balance sheet. Similarly, both paid and unpaid expenses are recorded as expenses on the income statement. Accrual accounting results is the best measure of a firm's profitability and allows a fair comparison with previous periods.

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