ACCA FA · Chapter 12 · Question 9 of 10
Which of the following items would appear in the operating activities section ONLY when the direct method is used?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Cash paid to suppliers and employees
Explanation
The direct method shows gross operating cash receipts and payments, such as cash received from customers and cash paid to suppliers and employees. Adjustments for depreciation, working capital movements and disposal profits are features of the indirect method, which starts with profit before tax.
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