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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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List the five operating cash outflows that a company reports under the direct method.

To determine

Provide the list of operating cash outflow prepared in cash flow statement under direct method.

Explanation

Operating activities: Operating activities include cash inflows and outflows from business operations.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A.    Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B.     Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

List of operating cash outflow in a direct method:

A company reports its operating cash outflow through these categories.

  • Payments to suppliers: Cost of goods sold, plus increases in inventory or minus decrease in inventory, plus decreases in accounts payable or minus increases in accounts payable...

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