Which method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses?
A) The direct method
B) The indirect method
C) Both the direct method and the indirect method
D) Neither the direct method nor the indirect method

Question

Quizplus · Accepted Answer

The direct method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses. The indirect method starts with net income and adjusts for non-cash items and changes in current assets and liabilities. Therefore, the direct method provides more detailed information about the company's cash flows.

Which Method of Preparing the Operating Activities Section of a Statement