Under the direct method, cash receipts are inflows of cash, and any change with a negative cash effect is:
A) added.
B) subtracted.
C) no change.
D) None of the above are true.

Question

Quizplus · Accepted Answer

Under the direct method of preparing the cash flow statement, any change that has a negative cash effect, such as an increase in accounts receivable or a decrease in accounts payable, is subtracted to calculate cash receipts or payments.

Under the Direct Method, Cash Receipts Are Inflows of Cash