The direct method of preparing the statement of cash flows requires more computation than the indirect method.

Question

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The direct method requires more computation because it requires the preparation of a schedule of cash receipts and disbursements, which involves the analysis of individual transactions. The indirect method, on the other hand, uses the accrual basis financial statements and makes adjustments for non-cash items, which is generally less time-consuming.

The Direct Method of Preparing the Statement of Cash Flows