Direct method

From ACT Wiki
Jump to navigationJump to search

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