The direct method of preparing the operating activities section of the statement of cash flows begins with net income.

Name: The direct method of preparing the operating activities section of the statement of cash flows begins with net income.
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The direct method of preparing the operating activities section of the statement of cash flows involves adjusting each line item of the income statement from the accrual basis to the cash basis, rather than starting with net income as in the indirect method.

The Direct Method of Preparing the Operating Activities Section of the Statement