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Juree Green
on Nov 19, 2024

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Under the direct method of determining the net cash provided by (used in) operating activities on the statement of cash flows, one step in adjusting selling and administrative expenses from an accrual to a cash basis is to subtract any increase in prepaid expenses.

Direct Method

A method of preparing the cash flow statement where actual cash flows from operating activities are listed, as opposed to the indirect method which adjusts net income for non-cash transactions.

Net Cash Provided

The amount of cash generated through a company's operations, after accounting for outflows and inflows.

Prepaid Expenses

Costs paid for in advance of receiving the benefit, such as insurance or rent, which are recorded as assets initially.

  • Identify and differentiate between direct and indirect methods of preparing cash flows from operating activities.
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HP
Harry PrestonNov 20, 2024
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