The indirect method starts with net earnings and converts them to net cash provided by operating activities. This means that:
A) the indirect method starts with net earnings and adds back all of the expenses relating to operating activities.
B) the indirect method adjusts net earnings for contra account balances.
C) the indirect method calculates net earnings as the difference between net assets and net liabilities.
D) the indirect method adjusts net earnings, for items that affected reported net earnings but did not affect cash.

Question

Quizplus · Accepted Answer

The indirect method adjusts net earnings for items that affected reported net earnings but did not affect cash. This is done by making adjustments for items such as depreciation, changes in current assets and liabilities, and non-cash expenses.

The Indirect Method Starts with Net Earnings and Converts Them