If a Company Uses the Indirect Method to Prepare the Statement

question 27

Multiple Choice

If a company uses the indirect method to prepare the statement of cash flows, how will the adjustment to reflect the amount of cash received from customers be presented on the statement?

• A)The adjustment will be for the increase or decrease in inventory during the period and will adjust net income in the operating activities section on the statement of cash flows.
• B)The adjustment will be for the increase or decrease in accounts payable during the period and will adjust net income in the operating activities section on the statement of cash flows.
• C)The adjustment will be for the increase or decrease in accrued expenses during the period and will adjust net income in the operating activities section on the statement of cash flows.
• D)The adjustment will be for the increase or decrease in accounts receivable during the period and will adjust net income in the operating activities section on the statement of cash flows.

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Definitions:

Core Elements

Fundamental components or essential parts that form the basis or foundation of a system, program, or process.

Preparation Phase

The initial stage in a project or process where objectives are defined, resources are allocated, and plans are made to guide actions towards achieving specific goals.

Job Instruction Training

A structured approach to training that focuses on teaching the essential skills required for performing specific job tasks.

Trainee

An individual undergoing training, often to improve their skills for a specific job or activity, with the intention of enhancing their performance and proficiency.