In preparing a statement of cash flows, cash flows from operating activities
A) are always equal to accrual accounting income.
B) are calculated as the difference between revenues and expenses.
C) can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.
D) can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash.

Question

Quizplus · Accepted Answer

Cash flows from operating activities can be calculated using the indirect method, which starts with net income and then adjusts for non-cash items and changes in working capital. This involves adding back non-cash expenses (like depreciation) and accounting for changes in accounts receivable, accounts payable, and inventory, among others, to arrive at the cash generated from operating activities.

In Preparing a Statement of Cash Flows, Cash Flows from Operating