Using the Indirect Method, Which of the Following Would Be

question 51

Multiple Choice

Using the indirect method, which of the following would be subtracted from profit?

• A)depreciation expense
• B)increase in accounts receivable
• C)increase in accounts payable
• D)decrease in prepaid expenses

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Definitions:

Accounting Principles

Guidelines and rules that govern the accounting and financial reporting practices of businesses, ensuring consistency, reliability, and comparability of financial statements.

Conservatism

An accounting principle that advises caution, directing accountants to choose methods and estimates that are least likely to overstate assets and income.

Fair Value Accounting

An accounting approach that measures and reports assets and liabilities at their estimated market prices.

Financial Crises

A situation where the value of financial institutions or assets drops significantly, often characterized by panicked selling and loss of confidence in the financial system.