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    Cashflow: Direct Method-Accrual Method To Cash Basis. Gross Cash Receipts and Gross Cash Payments

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    Ricci Ocampo
    This document discusses methods for preparing cash flow statements, specifically the direct and indirect methods. The direct method shows major classes of gross cash receipts and payments, while the indirect method adjusts net income to reconcile to net cash flow from operating activities. Key points include: interest and taxes paid/received are operating cash flows; dividends paid are financing and dividends received are investing; depreciation is added back under the indirect method.

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    Cashflow: Direct Method-Accrual Method To Cash Basis. Gross Cash Receipts and Gross Cash Payments

    Uploaded by

    Ricci Ocampo
    26 views3 pages
    This document discusses methods for preparing cash flow statements, specifically the direct and indirect methods. The direct method shows major classes of gross cash receipts and payments, while the indirect method adjusts net income to reconcile to net cash flow from operating activities. Key points include: interest and taxes paid/received are operating cash flows; dividends paid are financing and dividends received are investing; depreciation is added back under the indirect method.

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    Original Title

    Cashflow

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    This document discusses methods for preparing cash flow statements, specifically the direct and indirect methods. The direct method shows major classes of gross cash receipts and payments, while the indirect method adjusts net income to reconcile to net cash flow from operating activities. Key points include: interest and taxes paid/received are operating cash flows; dividends paid are financing and dividends received are investing; depreciation is added back under the indirect method.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    26 views3 pages

    Cashflow: Direct Method-Accrual Method To Cash Basis. Gross Cash Receipts and Gross Cash Payments

    Uploaded by

    Ricci Ocampo
    This document discusses methods for preparing cash flow statements, specifically the direct and indirect methods. The direct method shows major classes of gross cash receipts and payments, while the indirect method adjusts net income to reconcile to net cash flow from operating activities. Key points include: interest and taxes paid/received are operating cash flows; dividends paid are financing and dividends received are investing; depreciation is added back under the indirect method.

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    © All Rights Reserved
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    The document discusses the direct and indirect methods for preparing the statement of cash flows and provides guidelines for adjusting net income to the cash basis under the indirect method.

    The direct method reports major classes of gross cash receipts and gross cash payments, while the indirect method adjusts net income for non-cash items and changes in working capital. The direct method does not include depreciation/amortization in the calculation.

    Under the indirect method, non-cash expenses such as depreciation are added back to net income, gains/losses on disposal of assets are deducted/added, and changes in working capital accounts are deducted/added depending if they use assets or reduce liabilities.

    Cashflow

    Direct method- Accrual method to cash basis.

    - Gross cash receipts and gross cash payments

    W/ formulas

    Indirect method-:

    Note:

    Cash payments to settle obligatins such as trae accounts and notes payable, income tax payable,
    accrued expenses and similar items are operating activities, not financing activites.

    Interest
    ALTERNATIVELY
    Interest paid and interest received Financing CF-cost of obtaining
    Interest paid shall be classified as operating Financial resources
    cash flows b/c they enter in to the
    determination of NI/NL. Investing CF- Return on
    Interest received investment
    Must be in consistent manner
    Dividend
    Operating cash flow Alternative: Investing cashflow
    Dividend received
    b/c it enters into the determinatiion of N/I -return on investment
    Dividend paid Financing cash flow Alternative: Operating cashflow

    Income taxes shall be separately disclosed as cash flows from operating activities unless they
    can be specifically identified with investing and financing

    Direct method

    PAS 7, paragraph 19 provides the entities


    Direct method encouraged to report cashflows from
    operating activities using the direct method
    Disclosed separately whether it has been
    Interest paid recognized in P&L or capitalized
    Income tax paid also disclosed separately
    Depreciation and do not appear in cashflow if using direct
    Amortization method.
    Indirect Method

    Guidelines of adjustment of net income to cash basis


    Increase Decrease
    Trade noncash assets Deducted from NI Added to NI
    Trade current liabilities Added to NI Deducted from NI
    Depreciation, Amortization, and other
    Added back to NI to eliminate the effect they had on NI
    noncash expense
    Gain Loss
    Disposal of PPE or early retirement of
    nontrade liabities is included in NI but
    it is a nonoperating item. Thus; Deducted from NI Added to NI

    Other noncash Deducted from NI Added to NI

    cash flows arising from the purchase and


    Trading securites sale of dealing or trading securties are
    classified as operating activities

    Cash receipt from sale of goods and rendering of servies


    royalties, rental, fees, commissions and other revenue
    to suppliers for goods and services
    of an insurance enterprise for permiums and claims, annuties and other policy benefits
    or refunds of income taxes unless they can be specifically identified with financing and investing
    act.
    and payments for securities held for dealing or trading purposes.

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