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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 16, Problem 7Q
Textbook Problem
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Explain the difference between the two methods used to prepare the operating section of the statement of cash flows. How do the results of these two approaches compare?

To determine

Concept introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. Cash flows from operating activities can be prepared using direct or indirect method. The Cash flows are categorized into three categories as follows:

  • Cash flows from operating activities
  • Cash Flows from investing activities
  • Cash flows from financing activities

To compare:

The two methods of preparing the operating activities section of the statement of cash flows.

Explanation of Solution

There are two ways to present the operating activities section of the statement of cash flows; Direct and Indirect method.

Under the direct method, each operating cash flow is presented and net cash flow from operating activities is calculated by adding all the operating cash flows and subtracting all the operating cash outflows...

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Chapter 16 Solutions

Principles of Accounting Volume 1
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Ch. 16 - Which of the following would trigger a subtraction...Ch. 16 - Which of the following represents a source of cash...Ch. 16 - Which of the following would be included in the...Ch. 16 - If beginning cash equaled $10,000 and ending cash...Ch. 16 - Which of the following is a stronger indicator of...Ch. 16 - What function does the statement of cash flows...Ch. 16 - Is it possible for a company to have significant...Ch. 16 - What categories of activities are reported on the...Ch. 16 - Describe three examples of operating activities,...Ch. 16 - Describe three examples of investing activities,...Ch. 16 - Describe three examples of financing activities,...Ch. 16 - Explain the difference between the two methods...Ch. 16 - Why is depreciation an addition in the operating...Ch. 16 - When preparing the operating section of the...Ch. 16 - If a company reports a gain/(loss) from the sale...Ch. 16 - Note payments reduce cash and are related to...Ch. 16 - Is there any significance that can be attributed...Ch. 16 - 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