The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.

Question

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The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments. This method presents a more detailed picture of the company's cash flows compared to the indirect method, which starts with net income and makes adjustments for non-cash items. However, the direct method is more time-consuming and costly to prepare than the indirect method.

The Direct Method of Preparing the Operating Activities Section of the Statement