Asked by Tonya Trisko on Jun 26, 2024
Verified
Companies can use either the direct or indirect method to prepare the operating section of the statement of cash flows.
Direct Method
A cash flow statement preparation method that shows the specific sources of operating cash receipts and payments.
Indirect Method
A financial reporting approach used in cash flow statements where net income is adjusted for non-cash transactions, depreciation, and changes in working capital to determine cash flow from operating activities.
- Gain insights into the differences between direct and indirect strategies for reporting cash flows associated with operating activities.
Verified Answer
LN
Linda NguyenJul 01, 2024
Final Answer :
True
Explanation :
Companies can choose to use either the direct or indirect method to prepare the operating section of the statement of cash flows. The direct method shows actual cash inflows and outflows from operating activities, while the indirect method adjusts net income for non-cash items and changes in working capital to arrive at cash flows from operating activities.
Learning Objectives
- Gain insights into the differences between direct and indirect strategies for reporting cash flows associated with operating activities.
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