With respect to the content and form of the statement of cash flows,

a. The pronouncements covering the cash flow statement encourage the use of the indirect method.

b. The indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations.

c. The direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments.

d. The reconciliation of the net income to net operating cash flow need not be presented when using the direct method.

Question

Jean

Business

18 May, 00:24

With respect to the content and form of the statement of cash flows,

a. The pronouncements covering the cash flow statement encourage the use of the indirect method.

b. The indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations.

c. The direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments.

d. The reconciliation of the net income to net operating cash flow need not be presented when using the direct method.

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Answers (1)

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Cynthia Odonnell · Answer 1

c. The direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments.

Explanation:

The correct statement is C.

As this statement states that, in direct method of cash flow statement, operating cash flows shows, displays significant cash received from major classes and significant cash paid to major classes, showing gross receipts and gross payments.

In indirect method no general cash receipts ad cash payments in operating cash flow is shown, it relates to displaying adjustments in net income, and changes in working capital etc:

Thus, this is the correct statement of all the statements provided.