ExpertMedium1 markMultiple Choice
CPA · Question 46 · Area 2: Financial Statement Analysis
A company uses the Direct Method for Cash Flow from Operations. Which of the following is NOT reported?
A company uses the Direct Method for Cash Flow from Operations. Which of the following is NOT reported?
Answer options:
A.
Cash received from customers.
B.
Cash paid to suppliers.
C.
Depreciation Expense.
D.
Cash paid for interest.
How to approach this question
Direct Method = Checkbook view (Cash In, Cash Out). Depreciation is not a check you write.
Full Answer
C.Depreciation Expense.✓ Correct
The Direct Method lists actual cash inflows and outflows. Depreciation is a non-cash accounting adjustment, so it is not listed. (Note: A reconciliation of Net Income to Cash Flow is still required in the notes, where Depreciation would appear, but it's not in the main body of the Direct Method statement).
Common mistakes
Thinking Depreciation is cash flow.
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