The direct method of preparing the operating section of the statement of cash flows:
A)is the most popular method used.
B)reports all cash receipts and cash payments from operating activities.
C)reconciles net income to net cash provided by operating activities.
D)reports different amounts for investing and financing activities than the direct method.

Question

Quizplus · Accepted Answer

The direct method reports all cash receipts and cash payments from operating activities, whereas the indirect method only reconciles net income to net cash provided by operating activities. The direct method is less commonly used than the indirect method. The direct method reports the same amounts for investing and financing activities as the indirect method.

The Direct Method of Preparing the Operating Section of the Statement