Accounting · Cash Flow Statement
Consider the following statements regarding the calculation of cash flows from operating activities: Statement 1: The indirect method of reporting cash flows from operating activities starts with net profit or loss before taxation and makes adjustments for non-cash items. Statement 2: When calculating cash from operating profit, non-cash and non-operating items previously debited to the profit and loss account, such as depreciation, are subtracted from the net profit. Which of the options below is correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both statements are true.
- 2Statement 1 is true, but Statement 2 is false.✓
- 3Statement 1 is false, but Statement 2 is true.
- 4Both statements are false.
Correct answer
Statement 1 is true, but Statement 2 is false.
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