Chapter 11, Problem 19RQ

To determine

Cash flows from operating activities:

 These refer to the cash received or cash paid in day-to-day operating activities of a company.

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

• Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.
• Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To discuss: The primary cash inflows and cash outflows under the direct method for determining net cash flow from operating activities.