Asked by A Breath of Mahek on Apr 24, 2024
Verified
Cash collected from customers can be derived by appropriately adjusting revenue for changes in accounts receivable.
Accounts Receivable
Accounts receivable representing amounts due from customers to a business for delivered but unpaid for goods or services.
Revenue
The sum of money earned from the sales of goods or services that are central to a company's main activities.
- Compare and contrast direct and indirect methods for recording cash flows from operating activities.
- Appreciate how alterations in balance sheet accounts can affect cash flows and how they are reflected in the cash flow statement.
Verified Answer
CA
Chinedu AjuruchiMay 02, 2024
Final Answer :
True
Explanation :
Cash collected from customers is calculated by adjusting revenue for changes in accounts receivable, as accounts receivable represents the amount of revenue that has not yet been collected from customers. Therefore, as accounts receivable decreases (meaning fewer customers are yet to pay), cash collected from customers increases, and vice versa.
Learning Objectives
- Compare and contrast direct and indirect methods for recording cash flows from operating activities.
- Appreciate how alterations in balance sheet accounts can affect cash flows and how they are reflected in the cash flow statement.
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