Which of the following statements is incorrect regarding preparing a statement of cash flows using the direct method?
A) The direct method shows adjustments to net income.
B) The direct method shows the specific sources and uses of cash that are associated with operating activities.
C) Noncash expenses, gains, and losses are not used in the determination of net cash flow from operating activities.
D) A majority of companies use the indirect method rather than the direct method.

Question

Quizplus · Accepted Answer

The direct method does not show adjustments to net income; instead, it lists specific cash receipts and payments. Adjustments to net income are a characteristic of the indirect method.

Which of the Following Statements Is Incorrect Regarding Preparing a Statement