Which of the following statements about the statement of cash flows is correct?
A) The indirect method starts with income before extraordinary items.
B) The direct method is known as the reconciliation method.
C) The direct method is more consistent with the primary purpose of the statement of cash flows.
D) All of these answers are correct.

Question

Quizplus · Accepted Answer

The direct method shows operating cash flows by reconciling all cash inflows and outflows related to the operating activities, which is more consistent with the primary purpose of the statement of cash flows. The indirect method starts with net income before adjusting for non-cash items and is known as the income statement adjustment method, not the reconciliation method.

Which of the Following Statements About the Statement of Cash