A statement of cash flows based on the indirect method is prepared by converting every number on the income statement to its cash amount.

Question

Quizplus · Accepted Answer

A statement of cash flows based on the indirect method starts with net income and adjusts for non-cash items and changes in working capital accounts to arrive at the cash flows from operating activities. It does not involve converting every number on the income statement to its cash amount.

A Statement of Cash Flows Based on the Indirect Method