Questions: Which of the following is true about the direct and indirect method? The direct method will show more cash. The direct method will show less cash. The indirect method will show more cash. There is no difference because both will show the same increase or decrease in cash.

The answer is: There is no difference because both will show the same increase or decrease in cash.

This is incorrect. The direct method of preparing the cash flow statement involves listing all major operating cash receipts and payments during the period. It does not inherently show more cash than the indirect method.

This is incorrect. Similar to the first option, the direct method does not inherently show less cash. It simply presents the cash flows from operating activities in a different format.

This is incorrect. The indirect method starts with net income and adjusts for changes in balance sheet accounts to convert the accrual basis of accounting to the cash basis. It does not inherently show more cash than the direct method.

This is correct. Both the direct and indirect methods are simply different ways of presenting the cash flows from operating activities. Regardless of the method used, the total increase or decrease in cash for the period will be the same.