A cash flow statement prepared using the indirect method starts with:

A Cash received from customers

B Net income, then adjusts for non-cash items and changes in working capital

C Total revenue

D Cash at beginning of period

✓ Correct Answer: Option B

Indirect method (most common): starts with net income, adds back non-cash charges (depreciation, amortization), adjusts for changes in working capital (ΔAR, ΔAP, ΔInventory).

💡 Why is B) the correct answer?

The correct answer to the question "A cash flow statement prepared using the indirect method starts with:" is Option B: Net income, then adjusts for non-cash items and changes in working capital.

The other options — A) Cash received from customers, C) Total revenue, D) Cash at beginning of period — are incorrect for this Pre-MBA Exam Prep question. As explained above: Indirect method (most common): starts with net income, adds back non-cash charges (depreciation, amortization), adjusts for changes in working capital (ΔAR, ΔAP, ΔInventory).

📚 About This Pre-MBA Exam Prep Practice Question

This 2-level Pre-MBA Exam Prep question from the Accounting topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free Pre-MBA Exam Prep practice test or use flashcards for spaced repetition review.

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A cash flow statement prepared using the indirect method starts with:

✓ Correct Answer: Option B

📚 About This Pre-MBA Exam Prep Practice Question

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