Direct method

In relation to a Cashflow statement, the Direct method shows all the main categories of gross cash receipts and payments explicitly.

Contrasted with the Indirect method, which starts with a reported profit/(loss) figure and then adjusts it to calculate the net cash movement for a period.

The indirect method is more widely used in external financial reporting.

Even though financial reporting standards encourage the use of the direct method.

See also

• Cashflow statement
• Financial reporting
• Indirect method