Advantages of using the direct technique

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Reference no: EM132604

Question:

Determine the comments that follow as being True or False. If the comment is false, briefly describe why.

a. Both the direct and indirect techniques will produce the same cash flow from operating activities. True

b. Depreciation expense is added back to total income when the indirect method is used. True

c. One of the advantages of using the direct technique rather than the indirect method is that larger cash flows from financing activities will be reported. False, Both techniques are intended report the companies inflows and outflows.

d. The cash paid to suppliers is usually disclosed on the statement of cash flows when the indirect technique of statement preparation is employed. False, Indirect technique only repost revenue and expenses excludes receipts or payments of cash

e. The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct technique of statement preparation is used.

Reference no: EM132604

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