Which statement is TRUE regarding the direct method of preparing the statement of cash flows?
A)Depreciation is a cash payment under operating activities.
B)Sales on credit is listed under cash receipts in the operating section.
C)Collections from customers are the cash receipts listed in the operating section.
D)Proceeds from the issuance of long-term debt is listed as a cash receipt in the operating section.

Question

Quizplus · Accepted Answer

The direct method of preparing the statement of cash flows lists actual cash inflows and outflows from operating, investing, and financing activities. Collections from customers are the actual cash receipts listed in the operating section, not sales on credit or depreciation. Proceeds from the issuance of long-term debt would be listed under financing activities, not operating activities.

Which Statement Is TRUE Regarding the Direct Method of Preparing