Question
1. (TCO F) The company uses the indirect method for the statement of cash flow. How would an increase in the inventory balance be reported?
Cash outflow from investing activities Cash inflow from investing activities Deduction from net income to compute net cash flow from operating activities Addition to net income to compute net cash flow from operating activities |
The net increase/decrease of cash on the statement of cash flow should reconcile the beginning and ending balances on the balance sheet. The first step in preparing the statement of cash flow is to determine the cash flow from operations. Cash receipts from customers are computed by adding revenue from sales and a decrease in accounts receivable account. Noncash investing and financing activities are disclosed in a note to the financial statements or as a separate schedule. |
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