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

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes the direct method of reporting operating cash flows on the statement of cash flows?

It adjusts net income for changes in non-cash working capital accounts.

It lists major classes of gross cash receipts and payments from operating activities.

It combines cash flows from all activities into a single total.

It reports only investing and financing cash flows, not operating cash flows.

Previous problemNext problem

Verified step by step guidance

Understand the purpose of the direct method: The direct method of reporting operating cash flows focuses on presenting the actual cash inflows and outflows from operating activities, rather than starting with net income and adjusting for non-cash items.

Identify the key feature of the direct method: It lists major classes of gross cash receipts (e.g., cash received from customers) and gross cash payments (e.g., cash paid to suppliers or employees) related to operating activities.

Differentiate from the indirect method: Unlike the indirect method, which adjusts net income for changes in non-cash working capital accounts and non-cash expenses, the direct method directly reports cash transactions.

Eliminate incorrect options: The direct method does not combine cash flows from all activities into a single total, nor does it exclude operating cash flows. These descriptions are incorrect.

Select the correct description: The correct answer is the option that states, 'It lists major classes of gross cash receipts and payments from operating activities,' as this aligns with the definition of the direct method.