Direct and Indirect Cash Flow Essay

(According to According to What Is The Difference Between The pass Method And The mediate Method For The Statement Of Cash Flows? (2004-2014),) The main difference between the channel method and the confirmative method involves the cash flows from consume activities, the first atom of the tale of cash flows. (There is no difference in the cash flows describe in the investing and financing activities sections.) Under the direct method, the cash flows from direct activities will include the amounts for lines such as cash from customers and cash paid to suppliers. In contrast, the indirect method will show net income followed by the adjustments needed to convert the total net income to the cash amount from operating activities. The direct method must also provide a atonement of net income to the cash provided by operating activities. This is done automatically downstairs the indirect method.Nearly all corporations prepargon the statement of cash flows victimisation the ind irect method. The reason for financial accounting standards board allows both methods are simple. Both statements of cash flow preparation methods are allowable below basic accounting standards. The Financial Accounting Standards Board, however, prefers the direct method for the statement of cash flows. FASB prefers the method because business stakeholders find the statement easier to read than the indirect statement of cash flows. Companies prefer the indirect method as it is easier to grow since the financial information is already at hand.Companies sack up include disclosures with every the direct or indirect statement of cash flows. These disclosures can circumstance any non-cash financing and investing activities. FASB often requires disclosures with the statement of cash flows. Companies can prepare a secondary statement noting any significant non-cash activities for stakeholders (Direct Vs. substantiating Cash Flow Method, 1999-2014).ReferencesWhat is the difference betw een the direct method and the indirect method for the statement of cash flows? (2004-2014). Retrieved from http//www.accountingcoach.com Direct vs. Indirect Cash Flow Method. (1999-2014). Retrieved from http//www.ehow.com