Which of the following statements is most likely to be right?
A) The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the direct method.
B) The method of preparing the operating activities section of a statement of cash flows which reports its cash inflows from operations followed by its cash outflows for operations is the indirect method.
C) The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows.
D) Most companies use the indirect method of preparing the operating activities section of the statement of cash flows.

Question

Quizplus · Accepted Answer

The indirect method is the most commonly used method to prepare the operating activities section of the statement of cash flows. While the direct method adjusts net income for deferrals and accruals, it is less commonly used due to the increased complexity and difficulty of obtaining the necessary information. The FASB does not express a preference for either method.

Which of the Following Statements Is Most Likely to Be