The _____ for preparing the Statement of Cash Flows begins with net income and adjusts that amount for noncash items.
A)indirect method
B)direct method
C)income method
D)bottom-up method
E)top-down method

Question

Quizplus · Accepted Answer

The indirect method for preparing the Statement of Cash Flows starts with net income and then makes adjustments for noncash items such as depreciation, amortization, and deferred taxes to arrive at the cash from operating activities. The direct method, on the other hand, reports actual cash inflows and outflows from operating activities. The other options (C, D, E) are not methods for preparing the Statement of Cash Flows.

The _____ for Preparing the Statement of Cash Flows Begins