Direct method: Difference between revisions

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


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


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.
The indirect method is more widely used in external financial reporting.
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== See also ==
== See also ==
* [[Cashflow statement]]
* [[Cash flow statement]]
* [[Financial reporting]]
* [[Financial reporting]]
* [[Gross]]
* [[Gross]]
* [[IAS 7]]
* [[Indirect method]]
* [[Indirect method]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Cash_management]]

Latest revision as of 07:55, 1 February 2024

Cash flow statements.

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


The Indirect method 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.


See also