Question

The major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities section(s)?
A. The investing activities and financing activities sections.
B. The investing activities section only.
C. The operating activities and financing activities sections.
D. The operating activities section only.

Answer 1

Answer: Option D

                                             

Explanation: In simple words, operating activities refers to the  activities that are related to the core operation of the business.

While preparing cash flow statement from the method, the accountant records the inflow and outflow of the activities directly, however, in case of applying the indirect method the accountant takes the accrual basis to cash basis accounting transactions into consideration.

While preparing cash flow statement other two sections are prepared in a same way in which all the inflows and outflows are recorded directly.

   Thus, from the above we can conclude that the correct option is D.