Question

Specimen of cash flow by indirect method

Answer 1

The indirect operating activities section always starts out with the net income for the period followed by non-cashexpenses, gains, and losses that need to be added back to or subtracted from net income. These non-cashactivities typically include: Depreciation expense. Amortization expense.The statement of cash flows prepared using the indirect method adjusts net income for the changes in balance sheet accounts to calculate the cash from operating activities. In other words, changes in asset and liability accounts that affect cash balances throughout the year are added to or subtracted from net income at the end of the period to arrive at the operating cash flow.