The direct method of preparing the statement of cash flows ________.
A)is preferred by business over the indirect method
B)provides greater clarity for users than the indirect method
C)reports a greater amount of cash than the indirect method
D)reports a smaller amount of cash than the indirect method

Question

Quizplus · Accepted Answer

The direct method provides a more detailed and transparent view of the company's cash flows, allowing users to understand the sources and uses of cash more clearly. However, it does not necessarily report a greater or smaller amount of cash compared to the indirect method, as both methods ultimately arrive at the same net increase or decrease in cash for the period.

The Direct Method of Preparing the Statement of Cash Flows