Which of the following statements is TRUE of the direct and indirect methods of preparing the statement of cash flows?
A) The indirect method and the direct method will produce the same amount of net cash provided by operating activities.
B) The investing activities section is the only section that differs between the direct and indirect methods.
C) The indirect method shows three types of cash flows, but the direct method does not.
D) There is no difference in the way the operating activities section is presented.

Question

Quizplus · Accepted Answer

The direct and indirect methods will produce the same amount of net cash provided by operating activities, but will differ in how the information is presented. The investing and financing activities sections may also differ slightly between the two methods. The indirect method shows adjustments to net income to arrive at net cash provided by operating activities, while the direct method shows actual cash inflows and outflows from operating activities.

Which of the Following Statements Is TRUE of the Direct