The method most often used by companies to prepare the statement of cash flows is the:
A)accrual method.
B)direct method.
C)indirect method.
D)deferral method.

Question

Quizplus · Accepted Answer

The most commonly used method by companies to prepare a statement of cash flows is the indirect method. This method starts with net income and adjusts for non-cash items such as depreciation, as well as changes in current assets and liabilities, to arrive at the net cash flow from operating activities. The direct method is an alternative approach, where each individual cash receipt and payment is listed, but it is less common due to its complexity. The accrual method and deferral method are accounting methods used for recording transactions and do not directly relate to the preparation of the statement of cash flows.

The Method Most Often Used by Companies to Prepare the Statement