When a statement of cash flows is prepared using the indirect method,
A) net income is the starting point in determining cash flows from operations.
B) dividend expense is not included.
C) the increase in cash is different than when the direct method is used.
D) the amount of cash collected from customers is calculated.

Question

Quizplus · Accepted Answer

When preparing a statement of cash flows using the indirect method, the starting point is net income, and adjustments are made for non-cash items such as depreciation and changes in working capital accounts to arrive at cash flows from operations. Dividend expense is included as a financing activity, and the increase in cash is the same regardless of whether the direct or indirect method is used. The amount of cash collected from customers is not calculated using the indirect method.

When a Statement of Cash Flows Is Prepared Using the Indirect