Which method of preparing the statement of cash flows starts with the total for net income and removes the effects of gains and losses from nonoperating transactions, and then adds or subtracts balance sheet changes involving operating accounts?
A)direct method
B)fixed method
C)indirect method
D)funds flow method
E)variable method

Question

Quizplus · Accepted Answer

The described method is the indirect method of preparing the statement of cash flows. It starts with net income and adjusts for non-operating gains and losses, followed by changes in working capital accounts. The direct method, on the other hand, focuses on cash inflows and outflows directly related to operating activities, while the fixed, funds flow, and variable methods are not commonly used for preparing the statement of cash flows.

Which Method of Preparing the Statement of Cash Flows Starts