Under the ____________________ Method of Preparing a Statement of Cash

question 26

Short Answer

Under the ____________________ method of preparing a statement of cash flows, the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments, and all accruals of future operating cash receipts or payments.

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales over a certain period, such as rent or salaries.

Variable Costing

An approach in accounting that takes into account only the variable aspects of production costs (such as direct materials, direct labor, and variable manufacturing overhead) in the computation of product prices.

Net Operating Income

Net Operating Income is a measure of a company's profitability from its regular business operations, excluding income and expenses from interest, taxes, and other non-operational activities.

Fixed Manufacturing Overhead

Regular, constant expenses related to the production process that are not affected by the level of goods produced, such as rent and salaries of management.