The Reporting of Net Cash Provided or Used by Operating

question 105

Multiple Choice

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:

• A) Direct method of reporting net cash provided or used by operating activities.
• B) Cash basis of accounting.
• C) Classified statement of cash flows.
• D) Indirect method of reporting net cash provided or used by operating activities.
• E) Net method of reporting cash flows from operating activities.

---

Definitions:

Operating Activities

Activities that are directly related to the running of a business and the production of its goods and services, affecting the company's cash flow.

Direct Method

In financial accounting, refers to a way of allocating service department costs directly to producing departments without intermediate allocations.

Cash Basis

A bookkeeping practice in which income and outgoings are documented at the point of actual transaction, instead of when they are accrued.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments not related to the entity's primary business operations.