Cashflow statement by direct method5/29/2023 ![]() ![]() ![]() Accordingly, under the direct method of preparing the cash flow from operating activities section, each income statement line item-revenues, cost of goods sold (COGS), selling, general and administrative (SG&A), interest expense, income taxes, etc.-is converted from accrual to cash accounting ( Exhibit A.3). As discussed in Chapter 7, we know that the cash flow statement is designed for the purpose of tracing a company’s cash flows and their sources/uses.
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