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 major classes of gross cash receipts and cash payments for revenues and expenses 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 for preparing the operating activities section of the statement of cash flows. While the FASB does not officially endorse either method, they have expressed a preference for the direct method in the past. Choice A is incorrect because it describes the direct method, not the indirect method. Choice B describes the direct method, not the indirect method. Choice C is not entirely accurate as the FASB does not officially endorse either method.

Which of the Following Statements Is Most Likely to Be