Assume a Company Uses the Direct Method to Prepare Its

question 26

Multiple Choice

Assume a company uses the direct method to prepare its statement of cash flows.If the company's accounts receivable increase during the accounting period,the change in accounts receivable is:

• A)added to the change in the cash account to calculate cash collected from customers.
• B)subtracted from sales revenue to calculate the cash collected from customers.
• C)added to sales revenue to calculate the cash collected from customers.
• D)subtracted from the change in the cash account to calculate cash collected from customers.

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Definitions:

Budgeted Beginning Inventory

The projected inventory level at the start of a period, based on anticipated costs and demand.

Sales Budget

A detailed forecast of a company's sales, outlining expected sales volume and revenues for a specific period.

Credit

Credit is a financial term describing the ability of a buyer to receive goods or services before payment, based on the trust that payment will be made in the future.

Collected

The process of receiving payment for goods or services provided, often referring to the actual receipt of cash.