Starting with Net Income and Adjusting It for Items That

question 117

Multiple Choice

Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the

• A) direct method.
• B) indirect method.
• C) working capital method.
• D) cost-benefit method.

---

Definitions:

Ledger Account

A set of accounts in a ledger that provides a record of financial transactions categorized by account type.

Record-Keeping Function

The systematic process of organizing and maintaining financial documents and records of a company.

Voucher System

A control or accounting system where vouchers (documents that prove a transaction) are used to authorize and record transactions in an accounts payable system.

Account Payable

The liability created by a purchase on account.