Using the direct method of preparing the statement of cash flows, which of the following information is used to adjust reported revenues and expenses?
A)The income statement only
B)The balance sheet only
C)Both the income statement and the balance sheet
D)Neither the income statement nor the balance sheet

Question

Quizplus · Accepted Answer

Both the income statement and the balance sheet are used to adjust reported revenues and expenses in the direct method of preparing the statement of cash flows. The income statement provides information on revenues and expenses, while the balance sheet provides information on changes in asset and liability accounts that affect the cash balance.

Using the Direct Method of Preparing the Statement of Cash