The direct method of preparing the statement of cash flows
A)is preferred by IASB and FASB.
B)is the same as the indirect method with the exception of the cash account.
C)is an accumulation of net income accounts so that accountants can locate discrepancies in balances.
D)omits the financing section of the statement.
E)focuses on cash outflows over cash inflows.

Question

Quizplus · Accepted Answer

The direct method of preparing the statement of cash flows is preferred by both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). This method presents the actual cash inflows and outflows during the period, rather than just the adjustments made to net income as in the indirect method.

The Direct Method of Preparing the Statement of Cash Flows