Under the indirect method for preparing the statement of cash flows, _____.
A) each transaction and its effect on cash flows are analyzed
B) net income is reconciled with net cash flows from operating activities
C) current liabilities are subtracted from the total cash flows from operating activities
D) depreciation expense is deducted from net income to calculate the cash flows from operating activities

Question

Quizplus · Accepted Answer

Under the indirect method for preparing the statement of cash flows, net income is adjusted for non-cash transactions, changes in working capital, and other items to reconcile it with net cash flows from operating activities. This method starts with net income and then makes adjustments to convert the income statement from an accrual basis to a cash basis.

Under the Indirect Method for Preparing the Statement of Cash