Which of the Following Observations Concerning the Comparisons Between the Direct

question 33

Multiple Choice

Which of the following observations concerning the comparisons between the direct and indirect approaches of presenting a cash flow statement is true?

• A)The final dollar amount of cash flows from operating activities is different under the two approaches.
• B)The direct approach provides a clearer picture of cash flows related to operations.
• C)Authoritative bodies have generally expressed a preference for the indirect method.
• D)A separate reconciliation of operating cash flows and net income is required under the indirect approach.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials, labor, and overhead.

Job Order Costing

An accounting methodology used to track costs and revenues for individual jobs or orders, making it possible to report profitability per job.

Cost Accounting System

A method of accounting that tracks, records, and analyzes costs associated with the production of goods and services.

Raw Materials

Raw materials are the basic, unprocessed inputs used in the manufacturing of products or goods, essential to production processes.