The difference between the direct and indirect method of computing the cash flow statement occurs in the:
A)financing activities section.
B)operating activities section.
C)investing activities section.
D)managing activities section.

Question

Quizplus · Accepted Answer

The difference between the direct and indirect methods of computing the cash flow statement occurs in the operating activities section, where the direct method reports actual cash inflows and outflows, while the indirect method adjusts net income for non-cash items and changes in working capital to arrive at the operating cash flow. The financing, investing, and managing activities sections are all reported in the same way regardless of which method is used for the operating activities section.

The Difference Between the Direct and Indirect Method of Computing