What is the starting point for calculating cash flows from operations when the indirect method is used?
A) Find net income on the income statement.
B) Calculate the net change in the cash account.
C) Add the change in accounts receivable to sales revenue.
D) Identify the balance sheet accounts that relate to operating activities.

Question

Quizplus · Accepted Answer

The starting point for calculating cash flows from operations using the indirect method is to find net income on the income statement. This is because the indirect method adjusts net income for non-cash items such as depreciation, changes in working capital accounts, and other expenses or gains/losses that do not involve the receipt or payment of cash.

What Is the Starting Point for Calculating Cash Flows from Operations