The indirect method of preparing the statement of cash flows:
A) produces a different amount for cash flows from operating activities than the direct method
B) produces a different amount for cash flows from investing activities than the direct method
C) is more commonly used in practice than the direct method
D) is preferred by IFRS and ASPE over the direct method

Question

Quizplus · Accepted Answer

The indirect method is more commonly used in practice than the direct method because it starts with net income and adjusts for changes in balance sheet accounts to arrive at cash flows from operating activities, making it easier for companies to prepare since it uses information already found in the financial statements.

The Indirect Method of Preparing the Statement of Cash Flows