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:

Recognition Criteria

The conditions that must be met for a particular item to be recognized in the financial statements, according to accounting standards.

Revenue Recognition

The accounting principle that dictates the specific conditions under which income becomes recognized as revenue in the financial statements.

Secondary Characteristics

Refers to the additional properties or features of a financial instrument, entity, or market mechanism that support its primary functions.

Accounting Information

Data related to the financial transactions and status of an organization, used for analysis, decision making, and financial reporting.