A company calculates its cash flows from operating activities as profit +/- accruals.This is:
A) the direct method.
B) the indirect method.
C) neither the direct or the indirect method.
D) none of the above.

Question

Quizplus · Accepted Answer

The formula of calculating cash flows from operating activities as profit +/- accruals is indicative of the indirect method of cash flow statement preparation. The direct method involves calculating cash inflows and outflows directly from operating activities without using accruals. Therefore, option B is the correct choice.

A Company Calculates Its Cash Flows from Operating Activities as Profit