Direct method: Difference between revisions
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In relation to a Cash flow statement, the Direct method shows all the main categories of gross cash receipts and payments explicitly. | In relation to a Cash flow statement, the Direct method shows all the main categories of gross cash receipts and payments explicitly. | ||
The direct method is illustrated below, together with the indirect method for comparison | |||
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The Indirect method - illustrated above - starts with a reported profit/(loss) figure and then adjusts it to calculate the net cash movement for a period. | |||
The net cash movement reported is the same, regardless which method of presentation and calculation is followed. | |||
Revision as of 12:59, 10 August 2021
In relation to a Cash flow statement, the Direct method shows all the main categories of gross cash receipts and payments explicitly.
The direct method is illustrated below, together with the indirect method for comparison
The Indirect method - illustrated above - starts with a reported profit/(loss) figure and then adjusts it to calculate the net cash movement for a period.
The net cash movement reported is the same, regardless which method of presentation and calculation is followed.
The indirect method is more widely used in external financial reporting.
Even though financial reporting standards encourage the use of the direct method.
