Which of the following statements is TRUE regarding the Statement of Cash Flows for a Proprietary Fund (Enterprise Fund) under GASB?

Answer options:

The Direct Method is required for reporting cash flows from operating activities.

Interest paid is reported as an operating activity.

Capital asset acquisitions are reported as investing activities.

A reconciliation of operating income to net cash flow is not required.

How to approach this question

Recall GASB Cash Flow differences: 1. Direct Method Mandatory. 2. Four categories (Operating, Noncap Financing, Cap Financing, Investing). 3. Interest Paid/Received classification differences.

Full Answer

A.The Direct Method is required for reporting cash flows from operating activities.✓ Correct

GASB Statement 9 requires the use of the Direct Method for operating activities. It also defines four categories of cash flows (Operating, Noncapital Financing, Capital and Related Financing, Investing). Interest paid is financing, not operating.

Common mistakes

Applying FASB rules (Indirect method allowed, Interest is operating).

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