The indirect method of preparing a statement of cash flows
A)eliminates the need for a schedule of noncash investing and financing transactions.
B)provides a different result than the direct method.
C)adjusts net income for changes in current accounts.
D)shows collections from customers rather than the change in Accounts Receivable.

Question

Quizplus · Accepted Answer

The indirect method of preparing a statement of cash flows starts with net income and then adjusts for changes in current asset and liability accounts to arrive at cash flow from operating activities. This includes adjustments for changes in accounts such as Accounts Receivable, Inventory, and Accounts Payable, among others, to reflect the actual cash impact of operations.

The Indirect Method of Preparing a Statement of Cash Flows