The direct method for the preparation of the operating activities section of the statement of cash flows
A)Separately lists each major item of operating cash receipts
B)Separately lists each major item of operating cash payments
C)Separately lists each major item of operating cash receipts and cash payments
D)Reports profit and then adjusts it for items necessary to determine net cash provided or used by operating activities
E)All of these

Question

Quizplus · Accepted Answer

The direct method separately lists each major item of operating cash receipts and cash payments, providing a detailed breakdown of the sources and uses of cash in the operating activities section. This method is more informative than the indirect method, which starts with net income and makes adjustments for non-cash items and changes in working capital.

The Direct Method for the Preparation of the Operating Activities