Which method of preparing the statement of cash flows is similar to an income statement prepared on a cash basis?

Question

Quizplus · Accepted Answer

The direct method of preparing the statement of cash flows is similar to an income statement prepared on a cash basis because it reports cash inflows and outflows directly, similar to how an income statement prepared on a cash basis reports cash receipts and disbursements. In contrast, the indirect method reconciles net income to cash flows from operating activities, similar to how the accrual method of accounting reconciles net income to cash flows. The single-step and multiple-step methods are formats for the income statement and do not apply to the statement of cash flows.

Which Method of Preparing the Statement of Cash Flows Is