Cash generated from operating activities may be computed and reported using
A) the direct method only.
B) the indirect method only.
C) either the direct and indirect methods.
D) the combination method.

Question

Quizplus · Accepted Answer

The cash generated from operating activities can be reported through either the direct method, where specific cash movements are tracked and reported, or the indirect method, where adjustments are made to income statement items to convert them to cash basis. Companies can use either of these methods for reporting cash flows from operating activities, and the choice depends on their preference and convenience. Both methods have their pros and cons, and the decision should be made based on the company's unique circumstances and requirements. The combination method is not a standard method for reporting cash flows from operating activities and is not commonly used.

Cash Generated from Operating Activities May Be Computed and Reported