ACC122:DL 01 and 02-Principles of Accounting lI My Subscriptions Courses / ACC12

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ACC122:DL 01 and 02-Principles of Accounting lI My Subscriptions Courses / ACC122:DL 01 and 02-Principles of Accounting lI / Ch 14: Analysis and Interpretation of Financial Statements / Exam Chapters 3 QUESTION 8 Not yet answered Points out of 4.00 P Flag question With reference to the reporting of net cash flow from operating activities, which method do most companies use and why? Select one: O A. Indirect method because it is less expensive to prepare B. Direct method because it is based on the accrual basis of accounting C. Direct method because it requires a supplemental indirect method section D. Indirect method because it provides better information for decision making Next page Sare Apawers Previous page

Explanation / Answer

Under direct method, Cash sources and uses related to each account in income from continuning operations are listed individually.

Under Indirect method, Income from continuing operations is reconciled to net cash flow from operating activities by adjusting for differences related to changes in Balance sheet operating accounts and noncash income items, thus providing better information for decision making.

The answer is D.

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