Direct method

Question 1

cash received from customers

Answer 1

sales

Accounts receivable
+ decrease
- increase

Question 2

Cash paid for merchandise

Answer 2

COGS/ COMS

inventories
+ increase
- decrease

Accounts payable
- increase
+ decrease

Question 3

cash paid for operating expenses

Answer 3

other operating expenses

Prepaid
+ increase
- decrease

accrued expenses payable
+ decrease
- increase

salaries payable/ wages payable
+ decreases
- increases

Question 4

cash paid for interest

Answer 4

interest expense

interest payable
+ decreases
- increases

Question 5

cash paid for income tax

Answer 5

income tax expense

income tax payable
+ decreases
- increases