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    1. An increase in inventory balance would be reported as an addition to net income in arriving at net cash flow from operating activities using the indirect method. 2. The indirect method uses net accounts receivable and the direct method uses gross accounts receivable in determining cash flows from operating activities. 3. Under IFRS, interest received is classified as an operating activity and dividends received are classified as a financing activity when preparing a statement of cash flows.

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    ACCO 20023

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    Cash_Flow_theo.docx

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    1. An increase in inventory balance would be reported as an addition to net income in arriving at net cash flow from operating activities using the indirect method. 2. The indirect method uses net accounts receivable and the direct method uses gross accounts receivable in determining cash flows from operating activities. 3. Under IFRS, interest received is classified as an operating activity and dividends received are classified as a financing activity when preparing a statement of cash flows.

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    21 views1 page

    This Study Resource Was: Cash Flow - Theories

    Uploaded by

    venice cambry
    1. An increase in inventory balance would be reported as an addition to net income in arriving at net cash flow from operating activities using the indirect method. 2. The indirect method uses net accounts receivable and the direct method uses gross accounts receivable in determining cash flows from operating activities. 3. Under IFRS, interest received is classified as an operating activity and dividends received are classified as a financing activity when preparing a statement of cash flows.

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    © All Rights Reserved
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    of 1

    Cash Flow – Theories

    1. An increase in inventory balance would be reported in a statement of cash flows using the
    indirect method (reconciliation method) as a(n)
    a. addition to net income in arriving at net cash flow from operating activities.
    b. deduction from net income in arriving at net cash flow from operating activities.
    c. cash outflow from investing activities.
    d. cash outflow from financing activities.

    2. When preparing a statement of cash flows, the following are used for which method in
    determining cash flows from operating activities?
    Gross Accounts Receivable Net Accounts Receivable
    a. Indirect Direct
    b. Direct Indirect

    m
    er as
    c. Direct Direct
    d. Neither Indirect

    co
    eH w
    o.
    3. Ocean Company follows IFRS for its external financial reporting. Which of the following methods
    rs e
    of reporting are acceptable under IFRS for the items shown?
    ou urc
    Interest received Dividends received
    a. Operating Investing
    b. Investing Financing
    o

    c. Financing Investing
    aC s

    d. Operating Financing
    vi y re

    4. Which of the following statements are true?


    The primary purpose of the statement of cash flows is to provide cash-basis information about
    the company’s operating, investing, and financing activities.
    ed d
    ar stu

    The statement of cash flows provides information to help investors and creditors assess the cash
    and noncash investing and financing transactions during the period.

    Companies classify some cash flows relating to investing or financing activities as operating
    is

    activities.
    Th

    a. 1,2 and 3
    b. 1 and 3 only
    c. 2 and 3 only
    d. None of the above.
    sh

    5. Cash flows arising from trading securities are


    a. Classified as operating activity.
    b. Classified as investing activity.
    c. Classified as financing activity
    d. Not reported in the cash flow statement.

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