Question and answer
What are the differences between the direct and indirect presentation of cash flows? Why does the Financial Accounting Standards Board allow both methods? Which do you prefer? Why?
The Cash Flow Statement has three sections: Cash Flow from Operating Activities, Cash Flows from/for Investment Activities and Cash Flows from/for Financing Activities. The Direct Method is less commonly used than the Indirect Method. [ [ What is the Direct Method? It adds up the cash flows (as opposed to accruals, which the income statement and balance sheet are based upon) in and out of the
business in each of the three areas of Operations, Investments and Financing. The upside to the Direct Method is that it is easy to understand (money in, money out = what's left over), but the downside is that it isn't much help except in tell you what you already know. That is, it tells you some money came in, money came out and you have money left over. The Direct Method is more common in Commonwealth countries (e.g Australia) for some reason, but I'm not sure why. The Indirect Method is the much more common method, which starts with Net Profit (or another profit line item) and then adjusts the balance for non-cash items (e.g. depreciation), changes in balance sheet items (e.g. accounts receivables, accounts payable, inventory). The Indirect Method is less intuitive when looking at it by itself, but is much more helpful when used in conjuction with the income statement and balance sheet. ] ]
Expert answered|nlewis123|Points 40|
Question
Asked 6/15/2013 8:04:07 AM
0 Answers/Comments
Ask a question
Not a good answer? Get an answer now. (Free)
New answers
Rating

There are no new answers.

Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
Questions asked by the same visitor
What are the differences between the direct and indirect presentation of cash flows? Why does the Financial Accounting Standards Board allow both methods? Which do you prefer? Why?
Weegy: The statement of cash flows reports cash receipts, cash payments and net changes resulting from operating, investing and financing activities during a period. [ [ Investors and creditors use the information to assess an entity's ability to generate future cash flows, pay dividends and meet debt obligations, and to assess reasons for differences between net income and related cash receipts and payments. Format Sources of cash ... (More)
Question
All Categories|No Subcategories|Expert Answered
Asked 6/15/2013 7:08:53 AM
0 Answers/Comments
16,939,426 questions answered
Popular Conversations
A pet store has eight dogs and cats. Three are dogs. What fraction ...
Weegy: A pet store has eight dogs and cats. Three are dogs. 3/8 is the fraction that represents the cats.
7/25/2014 8:45:25 PM| 4 Answers
A catharsis is a cleansing of emotions. True False
Weegy: Catharsis is defined as the purging of the emotions or relieving of emotional tensions, especially through ...
7/25/2014 10:33:32 AM| 2 Answers
Given two points on the line, input the equation of the line in ...
Weegy: The equation of the line in standard form Ax + By = C is 40 Solution: firstly, [ you know that the slope of a ...
7/25/2014 12:25:44 PM| 2 Answers
Find the y-intercept for the line represented by the following ...
Weegy: The y-intercept for the line represented by the equation you have provided is C. (0,-3).
7/25/2014 10:22:56 PM| 2 Answers
2. ______ is the last phase in the program development life cycle. ...
Weegy: Maintenance is the last phase in the program development life cycle.
7/25/2014 10:45:27 PM| 2 Answers
When is the May/June 2014 Waec result coming out?
Weegy: It is already out, to check the result please do the following: Waec Result Checker online for 2014 1 Enter ...
7/26/2014 3:07:28 AM| 2 Answers
14. Select the NIMS term that is defined as 'the architecture to ...
Weegy: Multiagency Coordination is defined as 'the architecture to support coordination for incident prioritization, ...
7/25/2014 12:13:02 AM| 1 Answers
I am going to meet my girlfriend’s father for the very first ...
Weegy: 1 Dress nicely. Her family will like someone who looks mature and put together. Don't wear jeans that hang to ...
7/25/2014 12:35:52 AM| 1 Answers
What is the BEST way to define nonfiction? A. genre of literature ...
Weegy: The BEST way to define nonfiction- genre of literature based on facts or reality. User: A record of a ...
7/25/2014 12:18:56 AM| 1 Answers
Weegy Stuff
S
R
L
1
1
P
C
1
P
1
1
L
P
C
P
C
1
P
C
L
P
C
1
P
C
Points 2040 [Total 21040]| Ratings 1| Comments 2030| Invitations 0|Offline
S
L
P
C
P
C
1
L
P
C
L
P
C
P
C
P
C
Points 1957 [Total 17086]| Ratings 0| Comments 1957| Invitations 0|Offline
S
L
P
C
L
P
C
P
C
L
P
C
P
C
Points 1701 [Total 14256]| Ratings 1| Comments 1691| Invitations 0|Online
S
L
1
Points 1442 [Total 3625]| Ratings 2| Comments 1422| Invitations 0|Online
S
L
1
1
1
1
L
1
Points 1194 [Total 7371]| Ratings 2| Comments 1174| Invitations 0|Offline
S
1
L
Points 1028 [Total 3164]| Ratings 6| Comments 968| Invitations 0|Offline
S
1
L
1
L
P
P
L
Points 906 [Total 10514]| Ratings 0| Comments 906| Invitations 0|Offline
S
1
L
Points 792 [Total 4468]| Ratings 2| Comments 772| Invitations 0|Offline
S
P
C
L
P
L
1
Points 753 [Total 5807]| Ratings 4| Comments 713| Invitations 0|Offline
S
Points 270 [Total 418]| Ratings 2| Comments 250| Invitations 0|Online
Home | Contact | Archive | Blog | About | Terms | Privacy | Social | ©2014 Purple Inc.