The method of reporting cash flows from operating activities under which revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or expended for each item is called the
A) direct method.
B) indirect method.
C) combination method.
D) adjusted method.

Question

Quizplus · Accepted Answer

The direct method involves adjusting each item on the income statement to reflect the actual cash inflows and outflows. This method provides a more detailed and specific report of the cash flows from operating activities compared to the indirect method, which relies on adjusting net income for non-cash items and changes in working capital. The combination method is a mix of the direct and indirect methods and is not commonly used. There is no such method as the "adjusted method."

The Method of Reporting Cash Flows from Operating Activities Under