Under the indirect method of preparing the statement of cash flows, the starting point to determine net cash from operating activities is:
A) the beginning cash balance.
B) the ending cash balance.
C) net income.
D) sales.

Question

Quizplus · Accepted Answer

The starting point for the indirect method is net income as reported on the income statement. Adjustments are made for non-cash expenses and changes in current assets and liabilities to arrive at net cash from operating activities. The beginning and ending cash balances are not used as starting points under the indirect method. Sales are not used as net income is the starting point.

Under the Indirect Method of Preparing the Statement of Cash