GAAP allows the use of either the direct or indirect method but prefers the direct method. Companies who use the indirect method must also include a separate schedule reconciling net income to net cash flow provided by operating activities.

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The Answer of GAAP allows the use of either the direct or indirect method but prefers the direct method. Companies who use the indirect method must also include a separate schedule reconciling net income to net cash flow provided by operating activities.

GAAP Allows the Use of Either the Direct or Indirect