Examples of direct method in the following topics:
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- There is an indirect and a direct method for calculating cash flows from operating activities.
- The following is an example of using the direct method for calculating cash flows.
- To employ this direct method, use the following equation:
- The two methods to calculate cash flows are the direct method and the indirect method
- Explain the direct method for preparing the statement of cash flows
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- Companies have two methods available to them for measuring the net value of accounts receivable: the allowance method and the direct write-off method.
- Companies have two methods available to them for measuring the net value of accounts receivable--the allowance method and the direct write-off method.
- The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable.
- The second method is the direct write off method.
- Differentiate between the allowance method and the write off method for valuing notes receivable
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- Companies use two methods to account for bad debts: the direct write-off method and the allowance method.
- For tax purposes, companies must use the direct write-off method, under which bad debts are recognized only after the company is certain the debt will not be paid.
- Under the allowance method, an adjustment is made at the end of each accounting period to estimate bad debts based on the business activity from that accounting period.
- Differentiate between the direct write-off method and the allowance method of accounts receivable valuation
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- The indirect method starts with net-income while adjusting for non-cash transactions and from all cash-based transactions.
- There are two different methods that can be used to report the cash flows of operating activities.
- There is the direct method and the indirect method.
- Also, in the indirect method cash paid for taxes and cash paid for interest must be disclosed.
- Explain how to use the indirect method to calculate cash flow
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- Companies use two methods for handling uncollectible accounts: the allowance method and the direct write-off method.
- Companies use two methods for handling uncollectible accounts: the direct write-off method and the allowance method.
- The direct write-off method is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value.
- Note that the allowance method is the required method for federal income tax purposes (GAAP).
- Explain how to write off an uncollectible account using both the direct write-off and the allowance method.
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- The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve.
- This reserve is essentially the amount by which an entity's taxable income has been deferred by using the LIFO method.
- The direct method of preparing a cash flow statement results in report that is easier to understand.
- The indirect method is almost universally used because FAS 95 requires a supplementary report similar to the indirect method if a company chooses to use the direct method.
- This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions.
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- Companies have two methods available to them for measuring the net value of accounts receivable, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account.
- The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable.
- This second method is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value.
- The two methods are not mutually exclusive, and some businesses will have a provision for doubtful debts, writing off specific debts that they know to be bad (for example, if the debtor has gone into liquidation. )
- Describe the difference between using the allowance method vs. the write off method when recording a note receivable
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- To deal with foreign currency and bad debts, we have a "gain or loss" account and methods to measure the net value of accounts receivable.
- To deal with bad debts, companies have two methods available to them for measuring the net value of accounts receivable, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account.
- The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable.
- The second method is the direct write-off method.
- It is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value.
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- The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable.
- The second method is the direct write-off method.
- It is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value.
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- Control in this context is defined as ability to direct policies and management.
- During the year, the parent company can use the equity or the cost method to account for its investment in the subsidiary.
- As of 2004, the acquisition method is the only allowable method that can be used to prepare consolidated financial statements for companies that combined after 2004.
- Other consolidation methods previously used were the purchase and the pooling of interests methods .
- First, to arrive at consolidated net income for the two companies, ABC must eliminate the effect of the equity method used to account for its investment.