Which Phrase Below Best Describes the Direct Method for Reporting

question 47

Multiple Choice

Which phrase below best describes the direct method for reporting operating cash flows?

• A)A method that incorporates financing and investing activities into cash flows from operations.
• B)A method employing accrual-based accounting to convert cash flows to GAAP Net Income.
• C)A summary of operating transactions resulting in either a debit or credit to cash.
• D)A series of adjustments to Net Income to arrive at operating cash flows.

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Definitions:

Principal

The main party to a transaction, such as a borrower in a loan agreement or a buyer in a sales contract.

Contract

An enforceable pact by law that involves two or more individuals or groups.

Legal Capacity

The capability recognized by law for a person to act in a particular role or enter into a contract, often related to age and mental soundness.

Express Authority

The power granted to an agent or representative explicitly stated by the principal in a written or oral form.