Question

Using the indirect method, when the direction of change in Inventory is a(n) , the amount of that change is subtracted from net income to include inventory transactions that decrease cash, but do not impact net income

Answer 1

Using the indirect method, when the direction of change in Inventory is a(n), the amount of that change is subtracted from net income to include inventory transactions that decrease cash, but do not impact net income. This statement is True.

What is net income?

• Net income, also known as total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales, in the context of business and accounting refers to an entity's income less the cost of goods sold, expenses, depreciation and amortization, interest, and taxes for a given accounting period.
• It has also been described as the net growth in shareholders' equity that results from a company's operations.
• It is calculated as the residual of all revenues and gains less all expenses and losses for the period.
• Contrary to gross income, which merely deducts the cost of products sold from revenue, this is not the same thing.

Which is the indirect method?

• One of two accounting techniques that are used to produce a cash flow statement is the indirect method.
• The indirect method converts the operating component of the cash flow statement from the accrual method to the cash method of accounting by using increases and decreases in balance sheet line items.

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