The method of preparing the statement of cash flows that starts with net income and adjusts it for items that affect net income,but do not affect cash is called the:
A)lower-of-cost or market method.
B)direct method.
C)indirect method.
D)gross profit method.

Question

Quizplus · Accepted Answer

The method described is the indirect method, which starts with net income and adjusts for non-cash items to arrive at cash flow from operating activities. The direct method starts with actual cash receipts and payments, while the lower-of-cost or market, gross profit, and other methods are used for specific inventory or revenue recognition situations.

The Method of Preparing the Statement of Cash Flows That