Using the direct method of preparing the statement of cash flows,which of the following information must we have to adjust the 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

The direct method of preparing the statement of cash flows requires information from both the income statement and the balance sheet in order to adjust the reported revenues and expenses for non-cash transactions, such as depreciation and changes in accounts receivable and accounts payable. Therefore, choice C is the best answer.

Using the Direct Method of Preparing the Statement of Cash