Cash Flow Statment Direct & Indirect
zoeeileen
Registered Posts: 19 New contributor 🐸
Hi All
Hope someone can help me.
I really am stuck on the direct/ and indirect method of the cash flow statement.
I really dont understand the logic of the INDIRECT METHOD mostly, .
For example increase in receivebles is a (-) drecrase in payables is a (-).
I really hope someone can help.
Thankyou very much hope some one can help.
Zoe:001_smile:
Hope someone can help me.
I really am stuck on the direct/ and indirect method of the cash flow statement.
I really dont understand the logic of the INDIRECT METHOD mostly, .
For example increase in receivebles is a (-) drecrase in payables is a (-).
I really hope someone can help.
Thankyou very much hope some one can help.
Zoe:001_smile:
0
Comments
-
Hello,
On the cash flow statement the figure for an increase in receivables will appear as a negative as this means you have collected less from your debtors over the period - therefore have less cash. Same logic for payables, if these have decreased you have paid more out to creditors - so again have less cash.
The cash flow statement is broken down into operating, investing and financing activties. Once you have cracked it, you should find them pretty straight forward :001_smile:0 -
If you can't remember which way round the non cash items go, try creating words/phrases that will help. For example, I suggested to a fellow classmate that she remember that "I AM" = Increase in Assets (Receivables & Inventories) is a Minus.
From this you can deduce that a Decrease in Assets is a Plus, and you just have to reverse things for liabilities - Increase in Liabilities is a Plus and Decrease in Liabilities is a Minus.
If anybody found any other ways to remember them I'd be interested to hear them.
Hope this helps0 -
Thankyou both very much for your help Zoe:001_smile:0
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