When Using the Direct Method, How Is the Collection of Cash

question 87

Multiple Choice

When using the direct method, how is the collection of cash from customers shown on the statement of cash flows?

• A) Operating activity
• B) Investing activity
• C) Financing activity
• D) Noncash investing and financing activity

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Definitions:

Revenues and Expenses

The income generated from normal business operations and the costs incurred to generate that income.

Income Statement

A financial statement that shows a company's revenues and expenses, resulting in net income or loss over a specific period.

Balance Sheet

A financial statement that shows a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Statement of Cash Flows

A summary indicating how balance sheet account changes and revenue fluctuations impact cash and equivalents, broken down into the segments of operating, investing, and financing.