An Increase in the Inventory Account from $10,000 at the Beginning

question 205

Multiple Choice

An increase in the Inventory account from $10,000 at the beginning of the year to $15,000 at the end of the year would be shown on the statement of cash flows prepared under the indirect method as:

• A) an addition to net income of $5,000 in order to arrive at net cash provided by operating activities.
• B) a deduction from net income of $5,000 in order to arrive at net cash provided by operating activities.
• C) an addition to net income of $15,000 in order to arrive at net cash provided by operating activities.
• D) a deduction from net income of $10,000 in order to arrive at net cash provided by operating activities.

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Definitions:

Physical Controls

Measures and procedures used to safeguard assets, including inventory and equipment, from loss, theft, or unauthorized access.

Cashier Department

A division in a company or organization responsible for handling cash transactions, receipts, and disbursements.

Safety Deposit Boxes

Secure containers usually held within a bank vault, used to store valuable possessions, documents, or data that the owner wishes to protect.

Control Activity Over Cash

Practices and procedures implemented to manage and safeguard cash transactions and prevent fraud.