Question

When computing the net cash provided by operating activities under the indirect method on the statement of cash flows, a decrease in common stock would be subtracted from net income.
True

False

Answer 1

Answer: False

Explanation:

The given statement is false, as in the indirect method there is decrease in the common stock value are not be subtracted from the net income because it is not the current liability.

In the cash flow method, the cash flow from the operating activities are prepared by using two methods that are:

• Direct method
• Indirect method

The cash flow indirect method, indicate the net income figure from the given income statement. It is basically used to represent the net cash with all the necessary earnings from the actual cash received.