Starting with Net Income and Adjusting It for Items That

question 78

Multiple Choice

Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the

• A) direct method.
• B) indirect method.
• C) cost-benefit method.
• D) working capital method.

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Definitions:

External Users

Refers to individuals or entities outside of a company who use its financial information, such as investors, creditors, and regulatory agencies.

Accounting Standards

The rules and guidelines set by regulatory bodies that govern the preparation and presentation of financial statements.

Generally Accepted Accounting Principles

A collection of commonly-followed accounting rules and standards for financial reporting that is adopted by organizations to ensure consistency and transparency in financial statements.

Traditional Accounting Conventions

Established principles and practices that guide the preparation and presentation of financial statements.