During the Year the Balance in the Accounts Receivable Account

question 83

Multiple Choice

During the year the balance in the Accounts Receivable account increased by $6,000. In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows, it would be necessary to:

• A) subtract the $6,000 from the sales revenue reported on the income statement.
• B) add the $6,000 to the sales revenue reported on the income statement.
• C) subtract the $6,000 from the cost of goods sold reported on the income statement.
• D) add the $6,000 to the cost of goods sold reported on the income statement.

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Definitions:

Owner's Capital

The amount of equity a business owner has in the company, representing their investment plus any retained earnings or losses.

Accounts Payable

Liabilities or amounts owed by a company to its creditors/vendors for goods and services received but not yet paid for.

Buildings

Structures such as houses, offices, and factories that are constructed as fixed assets for use in operations or investment.

Land

A type of real estate that refers to the earth's surface extending downward to the center of the earth and upward infinitely into space, including all natural resources.