Question

When preparing the operating activities section of the statement of cash flows using the direct method, revenues and gains with no cash inflows are added back to net income. True or False 16

Answer 1

Answer: False

Explanation:

The primary reason for the Statement of Cashflows is to see how the company spends and receives its cash so that it can get a better view of just how much actual cash the company has.

This means that the method of preparing the cashflow statement could either be direct or indirect and this would not affect the fact that only items that have actual cash flows will be recorded.