Fundamental Accounting Principles Study Set 5
Quiz 16: Statement of Cash Flows
The indirect method separately lists each major item of operating cash receipts and cash payments.
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The direct method for preparing and reporting the statement of cash flows reports net income and then adjusts it for items necessary to calculate net cash provided or used by operating activities.
Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.
When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to income.
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