Using the Indirect Method

question 52

Multiple Choice

Using the Indirect Method
For the following question(s) , indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the indirect method.
-
When using the indirect method, where is the purchase of equipment for cash shown on the statement of cash flows?

• A) Operating activity
• B) Investing activity
• C) Financing activity
• D) Noncash investing and financing activity

---

Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenditure to the appropriate years.

Permanent Accounts

Accounts that carry their balances over into the next accounting period, including assets, liabilities, and equity accounts.

Trial Balance

A financial worksheet that consolidates all ledger balances into equal debit and credit column totals.