When Preparing the Operating Activities Section of the Statement of Cash

question 237

True/False

When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income.

Differentiate between the methods of depreciation and calculate depreciation expense.

Understand the treatment and implications of expenditures after initial asset acquisition.

Learn the financial reporting and disclosure requirements for fixed assets.

Grasp the factors affecting the determination of an asset's depreciable life and its residual value.

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Definitions:

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company's operating activities is used, as opposed to the indirect method.

Accounts Payable

Short-term liabilities owed to suppliers or creditors for goods and services received but not yet paid for.

Financing Activities

Refers to the transactions and events through which a business raises funds to operate and expand, including issuing shares, taking on loans, or issuing bonds.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the balance sheet.