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Overview of direct and indirect methods:

Assess the comments which follow as being true or false. If the comment is false, briefly describe why.

a) Both the direct and indirect methods will generate the same cash flow from operating actions.

b) Depreciation expense is added back to total income when the indirect method is utilized.

c) One of the merits of using the direct method instead of the indirect method is that larger cash flows from financing activities will be reported.

d) The cash paid to suppliers is usually disclosed on the statement of cash flows when the indirect method of statement preparation is used.

e) The dollar change in the Merchandise Inventory account appears on the statement of cash flows just when the direct method of statement preparation is employed.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M916308

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