Cash Flow Statement methods: In cash flow system 2 types of methods are followed by the companies which are:- 1. Direct Method 2. Indirect Method 1. Direct Method: The Direct cash flow statement is based on the actual cash system that is it shows the details of cash received and cash paid. It does not take into consideration the accrual cash system. Any cash receivable or payable will have no effect on the statement. 2. Indirect Method: In the indirect method, the net income is directly shown and then you need to adjust it to convert it into cash basis from accrual system by adding back non-cash transactions and adjust changes in balances of current assets and current liabilities. It is the most preferred method. Items which do not appear in Indirect method

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Chapter 16, Problem 4QC

To determine

Cash Flow Statement methods: In cash flow system 2 types of methods are followed by the companies which are:-

1. Direct Method

2. Indirect Method

1. Direct Method: The Direct cash flow statement is based on the actual cash system that is it shows the details of cash received and cash paid. It does not take into consideration the accrual cash system. Any cash receivable or payable will have no effect on the statement.

2. Indirect Method: In the indirect method, the net income is directly shown and then you need to adjust it to convert it into cash basis from accrual system by adding back non-cash transactions and adjust changes in balances of current assets and current liabilities. It is the most preferred method.

Items which do not appear in Indirect method

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