Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Operating Activities: Indirect Method

Financial Accounting

13. Statement of Cash Flows

Operating Activities: Indirect Method

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

What is the starting point for preparing the operating activities section of the statement of cash flows using the indirect method?

Net income

Cash received from customers

Total assets

Ending cash balance

Previous problemNext problem

Verified step by step guidance

Understand that the operating activities section of the statement of cash flows focuses on cash flows related to the core business operations, such as revenues and expenses.

Recognize that the indirect method starts with net income, which is derived from the income statement and represents the company's profitability during the period.

Adjust net income for non-cash items, such as depreciation and amortization, which are included in net income but do not involve actual cash flows.

Account for changes in working capital, such as increases or decreases in current assets (e.g., accounts receivable, inventory) and current liabilities (e.g., accounts payable), as these affect cash flow but are not directly reflected in net income.

Summarize the adjustments to net income to calculate the net cash provided by or used in operating activities, which is the final figure for this section of the statement of cash flows.