Question

The indirect method for the preparation of the operating activities section of the statement of cash flows:Multiple ChoiceSeparately lists each major item of operating cash receipts.Separately lists each major item of operating cash payments.Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.Is required if the company is a merchandiser.Must not be used in all circumstances.

Answer 1

Answer:

Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities

Explanation:

There are three types of activities in the cash flow statement which are described below:

1. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.  

These changes in working capital would be adjusted

2. Investing activities: It records those activities which include purchase and sale of the long term assets  

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.