Using the direct method of preparing the statement of cash flows,to determine the cash effects of operating activities,which of the following needs to be adjusted?
A)Net income
B)Reported revenues and expenses
C)Long-term assets and liabilities from the balance sheet
D)Equity as reported in the balance sheet

Question

Quizplus · Accepted Answer

Reported revenues and expenses need to be adjusted using the direct method in order to determine the cash effects of operating activities. Net income is derived from the adjustments made to reported revenues and expenses. Long-term assets and liabilities and equity are not adjusted in the statement of cash flows using the direct method.

Using the Direct Method of Preparing the Statement of Cash