Question

Which of the following items would NOT be shown on a statement of cash flows created using the indirect method?

a) Net Income

b) Retained Earnings

c) Cash, beginning of year

d) Cash, end of year

Answer 1

Answer:

b) Retained Earnings

Explanation:

The indirect method of statement of cash flows typically starts with the net income, which is then adjusted with the non-cash items such as depreciation and amortization.

This is then followed by the net cash flows from operating activities where the changes to current assets and liabilities are show.

Then the net cash flows from investing activities (for example the acquisition of assets) and the cash flows from investing activities.

This is followed by the opening cash balance and then the closing cash balance.

The missing item is retained earnings. Option b.