Statement Of Cash Flows Direct Method Example
Olivia Luz
Unlike the major financial statements cash flow statement is not prepared from the adjusted trial balance.
The direct method uses actual cash inflows and outflows from the company s operations. As you can see all of the operating activities are clearly listed by their sources. The information to prepare this statement usually comes from three sources. We have already seen bob s donut shoppe cash flow statement prepared under an indirect method.
The cash flow from investing activities and financing activities are calculated in the same way under both the methods. The direct method works by directly calculating each of the components of operating cash flows such as cash receipts from customers cash paid to suppliers cash paid for salaries etc. Once the values for these individual components have been calculated these are summed together in the cash flow from operating section of a cash flow statement. Detailed cash flow statement example direct method the cash flow statement can be drawn up directly from records of one s cash and bank account.
Here s an example of a cash flow statement prepared using the direct method. Direct method statement of cash flows example. For the year ended 12 31 x1. To illustrate direct method of statement of cash flows we will use the first year of operation for tax consultants inc.
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An example format for a direct method cash flow statement is shown below. Lowry locomotion constructs the following statement of cash flows using the direct method. The direct method is also known as the income statement method. Cash flow statement example direct and indirect method.
The cash flow from operating activities is one part of the direct method cash flow statement which also includes cash flows from investing and financing activities. Statement of cash flows direct method example.
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