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Cash Flow Stt. -Direct Method n Indirect Md

Patricia (C.S.- Professional) (sdd) (197 Points)

28 November 2009

I know how to prepare CFS by Indirect method but do not know how to make CFS by Direct Method. Pl inform how to make Cash Flow Statement by Direct MEthod and what logic to be applied b/w differentiating both. Is there any change in format as per AS-3.

regards

shalini ahuja

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8 Replies

CA Manasa (CA) (1479 Points)
Replied 28 November 2009

Cash Flow from Operating Activities (two formats)

Direct Method		Indirect Method

Cash received from customers		Net Income before Taxes and Extra Ordinary Items
Less:Cash paid to suppliers		Adjustments to reconcile net income to net cash provided
Less: Cash paid to employees		by operating activities:
		-Depreciation
Other cash operating expenditures		-Loss or Profit from Sale of Assets

		Changes in other accounts
Net cash provided by operating		affecting operations:
activities		Less:Increase in Current Assets
		Add: Decrease in Current Assets
		Less:Decrease in Current Liabilities


		Add: Payment Of Income Tax
		Add: Any other Extra ordinary Items

		Net cash provided by operating
		activities

The Difference between the two methods would be in calculating the cash flow from Operating Activities.I hope you understood the difference and both the methods are prescribed by AS 3 . But Indirect Method is more used.

ashish gupta ( student) (1922 Points)
Replied 28 November 2009

agree with manasa

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 28 November 2009

Manasa has presented it well. The balance investing and financing activities is the same in both methods. And Salini, since ur confident with indirect method u neednt worry much because tats more difficult and more freq asked when compared 2 direct method

(Guest)

Cash Flow Statement Format, Direct Method and Indirect Method

REFER TO THE FILE ATTACHED BELOW:

Attached File : 6 cash flow format.pdf downloaded: 911 times

CA Manasa (CA) (1479 Points)
Replied 28 November 2009

Originally posted by :Hareesh H Sharma
"	Manasa has presented it well. The balance investing and financing activities is the same in both methods. And Salini, since ur confident with indirect method u neednt worry much because tats more difficult and more freq asked when compared 2 direct method	"

Agree with you most questions cover only Indirect method but as it CA better u have a glance on the other method too..All the Best Shalini