Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Operating Activities: Direct Method

Financial Accounting

13. Statement of Cash Flows

Operating Activities: Direct Method

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Multiple Choice

The amount of net cash flows from operating activities calculated using the direct method is:

Net income adjusted for non-cash expenses and changes in working capital

The sum of cash receipts from customers minus cash payments to suppliers and employees

The difference between total revenues and total expenses for the period

Total cash inflows from investing and financing activities

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Verified step by step guidance

Understand the direct method for calculating net cash flows from operating activities. This method focuses on identifying actual cash inflows and outflows related to operating activities, rather than adjusting net income.

Identify cash receipts from customers. This includes cash collected from sales of goods or services during the period. Look for information such as accounts receivable collections or cash sales.

Determine cash payments to suppliers. This includes payments made for inventory purchases, raw materials, or other operating expenses. Look for accounts payable or direct cash payments to suppliers.

Calculate cash payments to employees. This includes wages, salaries, and other employee-related expenses paid during the period. Look for payroll records or cash disbursements for employee compensation.

Subtract the total cash payments (to suppliers and employees) from the total cash receipts (from customers) to arrive at the net cash flows from operating activities using the direct method.