Asked by Avery Harris on May 26, 2024
Verified
When comparing net cash provided by operating activities using the indirect versus direct methods:
A) net cash is higher using the indirect method.
B) net cash is lower using indirect method.
C) there is no difference between the two methods.
D) depreciation expense is used in the direct method.
Net Cash
Describes the amount of cash remaining after all cash expenditures, or disbursements, are subtracted from the cash receipts during a given period.
Indirect Method
A method used in accounting to calculate cash flows from operating activities, adjusting net income by changes in non-cash accounts.
Direct Method
A technique used in cash flow statements to present cash activities directly related to operating activities.
- Understand the impact of various transactions on cash flows under the indirect method.
- Explain the relationship between the statement of cash flows and other financial statements.
Verified Answer
DS
Dasani StallworthMay 31, 2024
Final Answer :
C
Explanation :
The net cash provided by operating activities will be the same whether the indirect or direct method is used. The difference between the two methods lies in the presentation and the process of calculation, not in the final amount of net cash provided by operating activities.
Learning Objectives
- Understand the impact of various transactions on cash flows under the indirect method.
- Explain the relationship between the statement of cash flows and other financial statements.