Question

The amount of net cash flow from operating activities shown on the statement of cash flows will be

Answer 1

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Answer 2

Answer: The same, regardless of whether the company uses the direct or indirect method to prepare the statement.​

Explanation:

In indirect method, the net income is adjusted to convert the accrual accounting net income to the cash flows from operating activities. This is done by adjusting for all none cash income and expense already recognised in the statement of profit or loss account; before factoring the increase or decrease in the current asset and liabilities. While in direct method, the cash amounts received and paid by the company are listed. The major difference between direct and indirect method is that for direct, the company list out all the cash it received or paid (I.e. it doesn't reconcile it's cash by using the net income as the starting point), while in indirect method, the net income is the starting point, thereafter adjusted for non cash items and movement in current and non curse t asset and liabilities.