Qtopia Company Uses the Direct Method to Prepare Its Statement

question 148

True/False

Qtopia Company uses the direct method to prepare its statement of cash flows. It has reported sales revenues of $100,000 on its income statement for the year 2012. If the balance in accounts receivable has gone up by $4,000 during the year, then $4,000 will have to be added to $100,000 to calculate collections from customers.

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Definitions:

Year-end Value

The financial value of an asset or account as recorded at the end of the fiscal year, which is important for annual financial reporting.

Internal Controls

Internal controls are the mechanisms, rules, and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Sarbanes-Oxley Act

A U.S. federal law that aims to protect investors by making corporate disclosures more reliable and accurate.

Compensating Balance

A minimum bank account balance that a borrower is required to maintain as a condition for some forms of loans or line of credit.