Under the ____________________ method of preparing a statement of cash flows, the
net cash flow from operating activities is computed by adjusting net income to remove
the effect of all deferrals of past operating cash receipts and payments, and all accruals
of future operating cash receipts or payments.
Cash flows from purchases, sales, and maturities of investments are classified as
financing activities.
“You Decide” Essay You are an entrepreneur with a great idea for a new business. In
order to obtain financing, the loan officer at First Second Third National Bank has
requested a budgeted set of financial statements. An accountant friend of yours has
mentioned that there are several options associated with plant assets that are available to
help you improve your budgeted income. Describe several decisions concerning
property, plant, and equipment that have an impact on reported net income. Are there
any ethical concerns in this area?
Closing entries are necessary to assure that the company’s net income for an accounting
period is accurately determined.
The practices of delaying payments to suppliers, speeding up collection from
customers, and earning the greatest possible return on any excess cash are known as
____________________ principles.
Operating activities involve the acquiring and selling of goods and services for cash or
on account.
Under a periodic inventory system, the Purchases account accumulates the cost of the
inventory acquired during the period.
The ____________________ principle determines when revenue is recorded and
reported.
What is the primary weaknesses of using raw financial statement numbers in cross
sectional analysis? How can the problem be solved?