Question

The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities?

1) True
2) False

Answer 1

The direct and indirect methods of reporting the statement of cash flows do present different information for investing and financing activities.

Step-by-step explanation:

The statement is true. The direct and indirect methods of reporting the statement of cash flows do present different information for investing and financing activities.

Direct method: The direct method reports cash flows from operating activities by itemizing the actual cash receipts and cash payments. This method provides more detailed information about the specific sources and uses of cash.

Indirect method: The indirect method starts with net income and adjusts it for non-cash expenses and changes in working capital. It then arrives at the net cash provided by operating activities. This method provides a reconciliation of net income to net cash flows.