Under the direct method of preparing the financing section of the statement of cash flows, net cash provided by financing activities is $388,000. If the indirect method of preparing the financing section of the statement of cash flows was used:
A) cash provided by financing activities would be less than $388,000.
B) cash provided by financing activities would be more than $388,000.
C) cash provided by financing activities would be the same, $388,000.
D) cash provided by operating activities would equal $388,000.

Question

Quizplus · Accepted Answer

The net cash provided by financing activities would be the same under both the direct and indirect methods of preparing the statement of cash flows. The difference between the two methods is in how the information is presented. The direct method shows the actual inflows and outflows of cash from financing activities, while the indirect method shows the changes in the balance sheet accounts that led to the net cash provided by financing activities. However, both methods should result in the same net cash flow amount.

Under the Direct Method of Preparing the Financing Section of the Statement