Both the Indirect and Direct Method of Preparing a Statement

question 122

True/False

Both the indirect and direct method of preparing a statement of cash flows begin with net income.

---

Definitions:

Purchases Discount

An accounting reduction in the price paid for goods or services if payment is made within a specified period.

Unearned Revenue

A liability account that records amount owed for goods or services in advance of delivery. The Cash account would record the receipt of cash.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Service Income

Income earned from the provision of services to clients or customers.