Which of the following would appear on a direct method statement of cash flows?
A) Depreciation Expense
B) loss on sale of assets
C) increase in Accounts Receivable
D) cash payments for inventory

Question

Quizplus · Accepted Answer

The direct method statement of cash flows reports cash inflows and outflows categorized by their sources, such as operating, investing, and financing activities. The direct method reports actual cash transactions, as opposed to indicating changes in balance sheet accounts. Cash payments for inventory is an operating activity and would thus appear on a direct method statement of cash flows. Depreciation expense is a non-cash expense and would appear on the indirect method statement of cash flows. Loss on sale of assets is also a non-cash item and wouldn't appear on either direct or indirect method statements of cash flows, as it isn't a cash inflow or outflow. Increase in accounts receivable is a balance sheet account and would be used to reconcile the change in cash from operating activities between the direct and indirect methods.

Which of the Following Would Appear on a Direct Method