When the operating activities section of the statement of cash flows is reported using the direct method,the FASB requires:
A)A reconciliation to the statement of cash flows under the indirect method.
B)A reconciliation of net income to net cash provided or used by operating activities.
C)Footnotes to the financial statements disclosing the difference between net income and the cash provided or used by financing activities.
D)The income statement to be prepared under the cash basis of accounting.
E)Noncash investing and financing activities must be included in the statement of cash flows.

Question

Quizplus · Accepted Answer

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the operating activities section of the statement of cash flows is reported using the direct method. This is necessary to show how net income was adjusted to arrive at the cash flow from operating activities.

When the Operating Activities Section of the Statement of Cash