If a Company Uses the Indirect Method to Determine Cash

question 11

Multiple Choice

If a company uses the indirect method to determine cash flows from operating activities,gains:

• A)must be added to net income and losses subtracted from net income.
• B)and losses must be added to net income.
• C)must be subtracted from net income and losses added to net income.
• D)and losses must be subtracted from net income.

---

Definitions:

Normal Balance

The side (debit or credit) on which increases are recorded in an accounting ledger; varies depending on the account type (asset, liability, equity, revenue, or expense).

Post Reference Column

A column in journal and ledger accounts that helps in cross-referencing entries between these two accounting records.

General Journal

A comprehensive record of financial transactions over the life of a company, listed in chronological order.

Assets

Resources owned by a company or individual that have economic value and can provide future benefits.