Cash Flow Statement Direct Method Format

What is Cash Flow:

Cash flow refers to inflows and outflows of cash from activities reported on an income statement. Cash outflows occur when operational assets are acquired, and cash inflows occur when assets are sold. 

There are two different methods that can be used to report the can be used to report the cash flows of operating activities:

• The direct method
• The indirect method

Cash Flow Statement Direct Method Format:

The direct method of presenting the statement of cash flow presents the specific cash flows associated with items that affect cash flow. Items such as:

• Cash receipts from customers
• Interests and dividends received
• Cash paid to suppliers
• Cash paid for salaries (to employees)
• Interest and income taxes paid

Once the cash inflows and and outflows from operating activities are calculated, they are added in the operating section of cash flows to obtain the net cash flow from activities.

Advantage of Cash Flow Statement Direct Method Format:

Cash Flow Statement Direct Method Format reveals operating cash receipts and payments.

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