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: Indirect Method

Financial Accounting

13. Statement of Cash Flows

Operating Activities: Indirect Method

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Multiple Choice

Which of the following cash flows is classified as an operating activity under the indirect method?

Cash received from issuing common stock

Cash paid to acquire equipment

Cash received from customers

Cash dividends paid to shareholders

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Verified step by step guidance

Understand the classification of cash flows: Cash flows are categorized into operating, investing, and financing activities. Operating activities involve the primary revenue-generating activities of the business, such as cash received from customers or cash paid to suppliers.

Review the indirect method: Under the indirect method, operating activities start with net income and adjust for non-cash transactions, changes in working capital, and other items related to the core operations of the business.

Analyze each option: Cash received from issuing common stock is a financing activity, as it relates to raising capital. Cash paid to acquire equipment is an investing activity, as it involves purchasing long-term assets. Cash dividends paid to shareholders are financing activities, as they represent a return to investors.

Identify the correct classification: Cash received from customers is classified as an operating activity because it directly relates to the core operations of the business and represents revenue generation.

Conclude the reasoning: Under the indirect method, cash received from customers is included in the adjustments to net income to calculate cash flows from operating activities, as it reflects the inflow of cash from the company's primary business operations.