The indirect method adjusts for the differences between the accrual-based income statement and "cash flows from operating activities."

Question

Quizplus · Accepted Answer

The indirect method starts with net income from the accrual-based income statement and adjusts it for non-cash items and changes in working capital to arrive at cash flows from operating activities. This is done to reconcile the accrual-based income statement with the actual cash flows generated by the business.

The Indirect Method Adjusts for the Differences Between the Accrual-Based