The Following Items Were Reported on the Balance Sheets and Income

question 71

Multiple Choice

The following items were reported on the balance sheets and income statement for the Flying Mullet Company: How would the change in accounts receivable be reported in the operating activities section of the statement of cash flows under the indirect method?

• A)As an addition to sales
• B)As a deduction from sales
• C)As an addition to net income
• D)As a deduction from net income

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, summarizing transactions over a period.

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.