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To determine cash payments for merchandise for the statement of cash flows using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.
Direct Method
A cash flow statement preparation approach that presents the specific cash flows associated with sources and uses of cash.
Merchandise Sold
Pertains to the goods that have been sold to customers by a company during a specific period, often accounted for in the sales revenue section of an income statement.
Accounts Payable
The amount a company owes on short-term debts to its vendors or suppliers.
- Identify the monetary receipts arising from sales and disbursements for inventory purchases, operational costs, and income tax payments by utilizing the direct technique.
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Learning Objectives
- Identify the monetary receipts arising from sales and disbursements for inventory purchases, operational costs, and income tax payments by utilizing the direct technique.
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