The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:
A) Direct method of reporting net cash provided or used by operating activities.
B) Cash basis of accounting.
C) Classified statement of cash flows.
D) Indirect method of reporting net cash provided or used by operating activities.
E) Net method of reporting cash flows from operating activities.

Question

Quizplus · Accepted Answer

The direct method of reporting net cash provided or used by operating activities lists cash receipts and cash disbursements and calculates the net amount, whereas the indirect method adjusts net income for non-cash items and changes in working capital accounts, making it a more complicated method. Therefore, the best answer is A, the Direct method of reporting net cash provided or used by operating activities.

The Reporting of Net Cash Provided or Used by Operating