Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. (Note that "Not Affected" means that the event does not affect that element of the financial statements or the event causes an increase in that element that is offset by a decrease in the same element.)Increase = IDecrease = DNot Affected = NAA transaction recorded as a debit to Accounts Receivable and a credit to a revenue account.AssetsLiabilitiesStk. EquityRevenuesExpensesNetStmt. of IncomeCash Flows???????
What will be an ideal response?
(I) (NA) (I) (I) (NA) (I) (NA)
Recognizing revenue earned on account increases both assets and stockholders' equity. Accounts receivable is debited because the transaction increases assets. Revenue is credited because the transaction increases stockholders' equity (retained earnings). On the income statement, revenue increases which increases net income. There is no effect on the statement of cash flows because it is not a cash transaction (i.e. revenue was earned on account).
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Indicate whether the statement is true or false
The indirect and direct methods:
A. Are two allowable methods to present operating activities in the statement of cash flows. B. Are used by companies about equally in actual practice. C. Affect the presentations of operating, investing, and financing activities. D. Arrive at different amounts for net cash flows from operating activities.