top button
Flag Notify
    Connect to us
      Facebook Login
      Site Registration

Facebook Login
Site Registration

What is the difference between the direct method and the indirect method for the statement of cash flows?

+1 vote
27 views
What is the difference between the direct method and the indirect method for the statement of cash flows?
posted Aug 16, 2017 by Deepika Jain

Share this question
Facebook Share Button Twitter Share Button LinkedIn Share Button

1 Answer

0 votes

The main difference between the direct method and the indirect method involves the cash flows from operating activities, the first section of the statement of cash flows. (There is no difference in the cash flows reported in the investing and financing activities sections.)

Under the direct method, the cash flows from operating activities will include the amounts for lines such as cash from customers and cash paid to suppliers. In contrast, the indirect method will show net income followed by the adjustments needed to convert the total net income to the cash amount from operating activities.

The direct method must also provide a reconciliation of net income to the cash provided by operating activities. (This is done automatically under the indirect method.)

answer Aug 18, 2017 by Abhishek Maheshwari
Contact Us
+91 9880187415
sales@queryhome.net
support@queryhome.net
#280, 3rd floor, 5th Main
6th Sector, HSR Layout
Bangalore-560102
Karnataka INDIA.
QUERY HOME
...