CameraIcon
CameraIcon
SearchIcon
MyQuestionIcon


Question

Under the direct method, which of the following items must be added to operating expenses reported on the income statement to determine cash payments for operating expenses?


A
Increase in accrued expenses
loader
B
Decrease in prepaid expenses
loader
C
Increase in income taxes payable
loader
D
Increases in prepaid expenses
loader

Solution

The correct option is D Increases in prepaid expenses
Under direct method of statement of cash flow, major heads of cash inflows and outflows are considered. Certain items are recorded on accrual basis in profit and loss account.
Hence, certain adjustments are made to convert them into cash basis such as cash receipt from customers, cash payments to supplies, purchases, prepaid expenses etc. 

Accountancy

Suggest Corrections
thumbs-up
 
0


similar_icon
Similar questions
View More


similar_icon
People also searched for
View More



footer-image