Asked by Angelica Golebiewski on May 13, 2024
Verified
To determine cash payments for operating expenses for the statement of cash flows using the direct method, a decrease in accrued expenses is added to operating expenses payable other than depreciation.
Direct Method
An approach in cost accounting that allocates service department costs directly to production departments without considering inter-service department flows.
Operating Expenses
Costs associated with the day-to-day operations of a business, excluding direct labor and materials.
Accrued Expenses
Expenses that have been incurred but not yet paid or recorded in the company's ledger during an accounting period.
- Calculate the cash received from sales activities and the cash spent on goods procurement, running costs, and corporate tax employing the direct method.
Verified Answer
AG
Arthur GordonMay 16, 2024
Final Answer :
True
Explanation :
A decrease in accrued expenses represents cash payments made for expenses that were previously recognized but unpaid, and thus should be added to operating expenses payable other than depreciation when using the direct method to prepare the statement of cash flows.
Learning Objectives
- Calculate the cash received from sales activities and the cash spent on goods procurement, running costs, and corporate tax employing the direct method.