Explain which method provides the best understanding

Reference no: EM133500702

Question: Cash flow can be examined using either the direct or indirect accounting method. Discuss the differences between each method and explain which method provides the best understanding of the sources and uses of cash in an accounting period. In one of the methods, net income must be converted from accrual basis to cash basis to directly determine the flow of cash in the accounting period. Since, in this method, we must convert the income statement to cash, and we know that the cash basis of accounting for financial statements is not GAAP, explain why this is a requirement? Provide and examples in your discussion.

Reference no: EM133500702

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