In preparing a statement of cash flows, the method involves adjusting net income to reconcile it to net cash flows from operating activities.
A)direct
B)indirect
C)accrual
D)none of the answers is correct

Question

Quizplus · Accepted Answer

The process of adjusting net income to reconcile it to net cash flows from operating activities is known as the indirect method of preparing a statement of cash flows. The direct method involves reporting actual cash inflows and outflows for operating activities instead of adjusting net income. Accrual accounting is the basis for preparing financial statements, including the cash flows statement. Therefore, the correct answer is option B.

In Preparing a Statement of Cash Flows, the Method Involves