In preparing a statement of cash flows, the ____ method involves adjusting net income to reconcile it to net cash flows from operating activities.
A) direct
B) indirect
C) accrual
D) None of these are correct

Question

Quizplus · Accepted Answer

The indirect method reconciles net income to net cash flows from operating activities by adjusting for non-cash transactions and changes in current assets and liabilities. The direct method calculates cash inflows and outflows directly from operating activities, which is often more time-consuming and less commonly used. The accrual method refers to the way that transactions are recorded on the financial statements, but is not directly related to the preparation of the statement of cash flows.

In Preparing a Statement of Cash Flows, the ____ Method