Which of the following methods starts with accrual income and adjusts it for the non-cash items it contains?
A)The indirect method
B)The direct method
C)Both a and b
D)None of the above

Question

Quizplus · Accepted Answer

The indirect method starts with accrual income and adjusts for non-cash items such as depreciation, amortization, and deferred taxes to arrive at operating cash flows. The direct method starts with actual cash receipts and payments and converts operating activities to a cash basis. However, neither method starts with cash flows and then adjusts for non-cash items.

Which of the Following Methods Starts with Accrual Income and Adjusts