SRJ Corporation Entered into the Following Transactions

question 25

Multiple Choice

SRJ Corporation entered into the following transactions:
The accrual of interest expense on a six-month note payable.
Collected cash for services to be provided within the next six months.
The accrual of revenue.
Which of the following statements is correct with respect to determining the net cash flow from operating activities on a statement of cash flows?

• A)The accrual of interest expense is added to net income.
• B)Collecting cash for services to be provided in the future is deducted from net income.
• C)The accrual of revenue is added to net income.
• D)Collecting cash for services to be provided in the future doesn't require an adjustment to net income.

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Definitions:

Net Sales

The total revenue generated from goods or services sold by a company, minus returns, allowances, and discounts.

Gross Profit

The financial result obtained after subtracting the cost of goods sold from total revenue, indicating the efficiency of a company in managing its production and labor costs.

Operating Expenses

Expenses incurred from the normal operations of a business, excluding the cost of goods sold, such as rent, salaries, and utilities.

Sales Revenue

The income received by a company from its sales of goods or services before any costs or expenses are deducted.