All of the following statements related to reporting cash flows from investing and financing activities are true except:
A)Reporting of financing activities is the same under the direct method and indirect method.
B)Changes in noncurrent liability accounts and equity accounts are analyzed to determine cash flows from financing activities
C)Changes in noncurrent asset accounts,current notes receivable,and current investments are analyzed to determine cash flows from investing activities.
D)The direct method applies accrual accounting while the indirect method applies cash basis accounting.
E)Reporting of investing activities is the same under the direct method and indirect method.

Question

Quizplus · Accepted Answer

The statement "The direct method applies accrual accounting while the indirect method applies cash basis accounting" is false. The direct method reports actual cash inflows and outflows, whereas the indirect method adjusts net income for non-cash items to arrive at net cash flow from operating activities. Both methods use accrual accounting for recording transactions. Therefore, option D is the correct answer.

All of the Following Statements Related to Reporting Cash Flows