Under the Direct Method of Determining the Net Cash Provided

question 38

True/False

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, a decrease in prepaid expenses would be added to selling and administrative expenses to convert selling and administrative expenses to a cash basis.

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Definitions:

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company’s balance sheet.

Cash

Liquid currency and instruments that are readily convertible to known amounts of cash and used to settle debts or buy goods and services.

Fees Earned

Income generated from the provision of services rather than the sale of goods, often recorded as revenue on the income statement.

Accounts Receivable

Funds that clients or customers have yet to pay to a company for products or services already provided.