Practice preparing the statement of cash flows using both direct and indirect methods. Covers operating, investing, and financing activities classification.
Start practising now — it's free Read study guidesThe statement of cash flows is often considered the most reliable of the three primary financial statements because it reports actual cash movements rather than accrual estimates. All cash flows are classified into: operating activities (core business), investing activities (long-term assets), and financing activities (transactions with owners and lenders).
The indirect method starts with net income and adjusts for non-cash items (depreciation, amortisation) and changes in working capital to arrive at operating cash flow. The direct method reports actual cash receipts and payments. Both methods produce the same total operating cash flow.
Practice questions cover both methods, classification of specific transactions, reconciliation of net income to operating cash flow, and interpreting cash flow patterns to assess financial health.
Our question engine generates fresh, exam-style questions tailored to this topic — with thorough explanations for every answer, including why wrong options are wrong.
Start practising cash flow statement →PrepQBank uses technology to enhance student learning — generating fresh, adaptive questions across every accounting and finance topic. Free to start. No credit card required.
Start free practice →