A company uses the direct method to prepare the statement of cash flow computes the amount of cash it receives from customers as
A)cost of goods sold plus ending inventory minus beginning inventory.
B)cost of goods sold minus ending inventory plus beginning inventory.
C)sales revenue plus the decrease (or minus the increase)in accounts receivable.
D)sales revenue minus the decrease (or plus the increase)in accounts receivable.

Question

Quizplus · Accepted Answer

The amount of cash received from customers can be computed by adding the decrease (or subtracting the increase) in accounts receivable to sales revenue. This is because sales revenue represents the total amount of sales, whereas the change in accounts receivable reflects the amount of cash received from customers during the period. Therefore, option C is the correct choice.

A Company Uses the Direct Method to Prepare the Statement