The indirect and direct methods use different computations but produce the same amount of net cash flow from operating activities.

Question

Quizplus · Accepted Answer

Both methods aim to present the same net cash flow from operating activities, so they should produce the same result even though they use different computations. The difference lies in the way they arrive at the net cash flow figure. The direct method reports actual cash inflows and outflows, while the indirect method starts with net income and then adjusts for non-cash items and changes in working capital to arrive at the net cash flow figure. Regardless of the method used, the final net cash flow figure should be the same.

The Indirect and Direct Methods Use Different Computations but Produce