Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?
A)The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
B)The indirect method starts with cash collected from customers and details cash inflows and outflows from operations.
C)The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
D)The net cash provided by or used in operations will be different depending on whether the direct or indirect method is used.

Question

Quizplus · Accepted Answer

The indirect method starts with net income and makes adjustments,such as adding back depreciation,to arrive at the net cash provided by or used in operations.The direct method starts with cash collected from customers and details cash inflows and outflows from operations to arrive at the net cash provided by or used in operations.Both methods will arrive at the same net cash provided by or used in operations.

Which of the Statements Below Is Correct When Comparing the Direct