# The income statement disclosed the following items for the year: The changes in the current asset and liability accounts for the year are as follows: a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. b. Briefly explain why net cash flows from operating activities is different from net income.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 16, Problem 7E
Textbook Problem
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## The income statement disclosed the following items for the year:The changes in the current asset and liability accounts for the year are as follows:        a.            Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method.       b.            Briefly explain why net cash flows from operating activities is different from net income.

a.

To determine

Prepare cash flows from operating activities sections of the statement of cash flows using indirect method.

### Explanation of Solution

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

 Cash flows from operating activities (Indirect method) Add: Decrease in current assets �...

b.

To determine

Explain why net cash flow from operating activities is different from net income.

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