Question

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of cash receipts and cash payments related to the day-to-day operations of the business.True / False.

Answer 1

Answer:

True

Explanation:

Direct method of preparing operating activities of statement of cash flows seek to present all inflows and outflows from the main activities of the Company e.g. receipts from customers, payment to labors, payment for materials and other direct impacts of cash.

Indirect method of cash flows starts from net profit, adjusting non cash items like depreciation and than working capital changes are incorporated.