The indirect method for preparation of the operating activities section of the statement of cash flows involves adjustments
A)For income statement items involving operating activities that do not affect cash inflows or outflows
B)To eliminate gains and losses resulting from investing and financing activities
C)For changes in noncash current assets and current liabilities
D)For income statement items involving operating activities that do not affect cash inflows or outflows and for changes in noncash current assets and current liabilities
E)All of these

Question

Quizplus · Accepted Answer

The indirect method involves adjustments for income statement items that do not affect cash (like depreciation), eliminating gains and losses from investing and financing activities, and adjusting for changes in noncash current assets and current liabilities. All these adjustments are necessary to reconcile net income to net cash provided by operating activities.

The Indirect Method for Preparation of the Operating Activities Section