
a.
Statement of
Indirect method: Under this method, different items are adjusted from the net income to calculate the net cash provided from operating activities and the amount is further adjusted with cash flows from investing and financing activities to finally arrive at the closing balance of cash.
Cash flows from operating activities: These are the cash generated from 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) |
Net Income xxxxx |
Add: Decrease in current assets |
Increase in current liability |
|
Loss on sale of plant assets |
Deduct: Increase in current assets |
Decrease in current liabilities |
Gain on sale of plant assets |
Net cash provided from or used by operating activities |
Table (1)
The net income reported by C Incorporation for the year ended December 31.
b.
To Explain: Why net income is different from net cash flow from operating activities.

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