Final answer:
The primary distinction between the indirect and direct method of a statement of cash flows is the presentation of operating activities, with the indirect method adjusting net income and the direct method listing cash transactions.
Step-by-step explanation:
The major difference between the indirect and the direct method of a statement of cash flows is the presentation of operating activities. The indirect method starts with net income and adjusts for non-cash expenses, changes in working capital, and other items to convert the income statement from an accrual basis to a cash basis. The direct method, however, lists all cash receipts and cash payments from operating activities, such as cash received from customers and cash paid to suppliers.
In both methods, the presentation of investing activities and financing activities remains the same, meaning that the major distinction solely lies within the operating activities section. Due to the ease of preparation, the indirect method is more commonly used, despite the direct method providing a clearer picture of cash flows from operating activities.