When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income. a) true
b) false

True

Explanation:

The Cash generated from the operating activities is actually the net cash that arises from operating activities which is the core operation of the organization.

When we use the Indirect method, we add back all the non cash deductions from Net Income and we also minus the non cash additions in the revenue.

The example of non cash deduction which is added back includes depreciation and amortization expense. On the other hand the example of non cash additions includes accrued revenue which would be deducted by increase in revenue.

Hence the statement is true.

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