Notice: Payments for answers will end 4/10/2017. Click for more info.
You have new items in your feed. Click to view.
Question and answer
Q: 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?
A: 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. ]
Get an answer
Original conversation
User: 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 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. ]
uxiali|Points 796|

User: Why must preferred stock dividends be subtracted from net income in computing earnings per share? Why is common stock usually not issued at a price that is less than par value?





Question
Asked 11/19/2012 4:47:26 PM
0 Answers/Comments
New answers
Rating

There are no new answers.

Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
0 questions answered
Popular Conversations
Aristotle was a student of Plato's. True False
Weegy: Aristotle was a student of Plato's. TRUE.
7/9/2017 6:34:10 PM| 1 Answers
Most collisions are caused by __________ A. drivers falling asleep at ...
Weegy: Most collisions are caused by driver's attitude.
7/9/2017 4:51:29 PM| 1 Answers
k2 + 3k + 2 = (k2 + k) + 2 ( __________ )
7/8/2017 8:58:45 AM| 1 Answers
Parasite can be Protozoa,fungi, or multicellular organisms. TRUE or ...
Weegy: Parasites can be protozoa, fungi, or multicellular organisms. TRUE.
7/7/2017 6:41:18 PM| 1 Answers
Development disabilities cannot be cured. TRUE or FALSE.
Weegy: Developmental disabilities cannot be cured. TRUE.
7/7/2017 6:00:57 PM| 1 Answers
. Classification of living things takes into consideration all of ...
Weegy: Classification of living things takes into consideration all of the following except: presence of cell ...
7/5/2017 12:07:33 PM| 1 Answers
What type of disorder is myasthenia gravis? A. Inflammatory ...
Weegy: Myasthenia gravis is a type of immune disorder. User: What surgical procedure involves breaking an ankylosed ...
7/5/2017 9:35:49 AM| 1 Answers
The lungs are the primary organ of the: digestive system respiratory ...
Weegy: The lungs are the primary organ of the: respiratory system. User: Endorphins are manufactured by the brain to ...
7/5/2017 6:54:42 AM| 1 Answers
During puberty you need more food and _____ to grow. oxygen carbon ...
Weegy: During puberty you need more food and oxygen to grow. User: Each cell in your body contains chromosomes.
7/5/2017 6:43:00 AM| 1 Answers
The condition of equilibrium that results in the displacement of the ...
Weegy: The condition of equilibrium that results in the displacement of the mantle by the continental and oceanic crust ...
7/10/2017 1:50:08 PM| 0 Answers
What is another name for the Circum-Pacific Belt? A. Pacific Ring ...
Weegy: Pacific Ring of Fire is another name for Circum-Pacific Belt
7/10/2017 1:47:35 PM| 0 Answers
Weegy Stuff
S
Points 29 [Total 30] Ratings 0 Comments 9 Invitations 2 Offline
S
Points 10 [Total 10] Ratings 0 Comments 0 Invitations 1 Offline
S
Points 10 [Total 10] Ratings 1 Comments 0 Invitations 0 Offline
S
Points 10 [Total 10] Ratings 0 Comments 0 Invitations 1 Offline
S
Points 4 [Total 4] Ratings 0 Comments 4 Invitations 0 Offline
S
P
P
L
P
P
P
Points 4 [Total 1734] Ratings 0 Comments 4 Invitations 0 Offline
S
Points 3 [Total 3] Ratings 0 Comments 3 Invitations 0 Offline
S
Points 2 [Total 2] Ratings 0 Comments 2 Invitations 0 Offline
S
Points 2 [Total 2] Ratings 0 Comments 2 Invitations 0 Offline
S
Points 2 [Total 2] Ratings 0 Comments 2 Invitations 0 Offline
* Excludes moderators and previous
winners (Include)
Home | Contact | Blog | About | Terms | Privacy | © Purple Inc.