A Note to the Accounts Reconciling Cash Flows from Operating

question 58

Multiple Choice

A note to the accounts reconciling cash flows from operating activities to net profit is required because:

• A) Complex calculations are required to convert cash based revenues.
• B) Items such as depreciation are only recorded in a cash system and not an accrual system.
• C) There is likely to be a disparity between cash from operations under AASB 107 and the profits reported in the income statement.
• D) The direct method is required under AASB 107.
• E) None of the given answers.

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Definitions:

Marginal Revenue

Marginal revenue refers to the additional income generated from selling one more unit of a product or service.

Marginal Cost

The cost of producing one additional unit of a product, which varies depending on the level of production.

Cover Charge

A fee that patrons are required to pay upon entry to a bar, nightclub, or restaurant, typically to cover entertainment expenses.

Hank's Honkytonk

A fictional or specific bar or entertainment venue, often associated with country music and dancing.