Cash Flow: Direct and Indirect Presentations
1.
Week 8 / Checkpoint
The differences between direct and indirect that they involve the way Cash Flow are from operations of activities. This I do recall is the first part of the Cash Flow Statement. The differences are to each are to follow.
Direct Presentation: involves the cash flows in which analyze the company results and uses of cash. There are three parts that report cash receipts and cash payments. These parts are operations, investments, and finance transactions. Operating transactions are receipts and payments from normal business operations. Investments transaction is the purchase or sale of long-term equity, and investments. Finance transactions are those affiliated with Banks. These are loans, and repayments to creditors, and investors.
Indirect Presentation: involves cash flow, but is not required as much information as the direct method. Companies construct the indirect presentation beginning with net income, and which is reported on the income statement. Accountant make’s changes to the numbers for all non-cash items. Fundamentally, the indirect preparation method takes an accrual-based income account, and converts it to a cash-basis income statement.
The Financial Accounting Standards Board prefers the direct method. This way it is easier to understand and report, but some may want to use the indirect, because it is required to prove supporting information, which could take a longer amount of time. After looking at both of the methods. In my opinion it would have to be whatever one I would need to use at the time. For example a short form of an income taxes this may be more useful than a long form which requires more ideal
Week 8 / Checkpoint
The differences between direct and indirect that they involve the way Cash Flow are from operations of activities. This I do recall is the first part of the Cash Flow Statement. The differences are to each are to follow.
Direct Presentation: involves the cash flows in which analyze the company results and uses of cash. There are three parts that report cash receipts and cash payments. These parts are operations, investments, and finance transactions. Operating transactions are receipts and payments from normal business operations. Investments transaction is the purchase or sale of long-term equity, and investments. Finance transactions are those affiliated with Banks. These are loans, and repayments to creditors, and investors.
Indirect Presentation: involves cash flow, but is not required as much information as the direct method. Companies construct the indirect presentation beginning with net income, and which is reported on the income statement. Accountant make’s changes to the numbers for all non-cash items. Fundamentally, the indirect preparation method takes an accrual-based income account, and converts it to a cash-basis income statement.
The Financial Accounting Standards Board prefers the direct method. This way it is easier to understand and report, but some may want to use the indirect, because it is required to prove supporting information, which could take a longer amount of time. After looking at both of the methods. In my opinion it would have to be whatever one I would need to use at the time. For example a short form of an income taxes this may be more useful than a long form which requires more ideal