What is the first step in identifying cash flows from operations when the indirect method is used?
A)Find net income from the balance sheet.
B)Calculate the net change in the cash account.
C)Add the change in accounts receivable to sales revenue.
D)Identify the balance sheet accounts that relate to operating activities.

Question

Quizplus · Accepted Answer

The first step in identifying cash flows from operations when the indirect method is used is to identify the balance sheet accounts that relate to operating activities. This involves identifying changes in accounts such as accounts receivable, accounts payable, and inventory that are related to the company's operating activities. Once these accounts have been identified, adjustments can be made to net income to arrive at the cash flows from operations. Therefore, option D is the best answer.

What Is the First Step in Identifying Cash Flows from Operations