Which of these are the two methods of preparing the cash flow statement?

 b. Direct & Indirect

He found two methods of preparing the cash flows are the direct method and the indirect method. Znserd here and style is direct, which makes the list is subject to the understanding of which are as follows:

1. We start a net profit from the reality of the income statement and then add him depreciation (where it is not concerned with a carrying expenses and the flow of real) where previously deducted from revenue to get to the net profit. Here we are over the role of the income statement and then get into the statement of financial position and of course there must be compared with the figures last year.

2. extract net cash flows from operating activities (changes between the current year and prior to working capital any current assets and current liabilities excluding cash and cash equivalents) as follows:

In addition inferiority change in assets and change it poses the increase in the assets of inferiority because the change in asset means generate cash inside the company. And deducted inferiority change in current liabilities and the change is added to the increase in liabilities of inferiority because the change in opponents means cash-out.

To become net cash flow from operating as follows:

Increase in inventories - notes he continued

Decrease in accounts receivable +

The increase in credit balances + notes that commitment

3. The net cash flow from investment activities which is about the purchase or sale of fixed assets - purchase or sale of a branch or part of it - to buy or sell long-term investments - loans or the collection of loans previously provided to others.

In the case of the purchase is deducted in the case of sales is added because we are talking about cash flow.

4. net cash flow from financing activities which is about to issue shares, bonds or other securities, long-term - Dividend - the company to buy back its shares - or repay the loans in all their forms consumption.

5. The result of the foregoing Net change in cash and cash equivalents add his balance Cash and cash equivalents beginning of the year to be output is the balance of cash and cash equivalents last year.

Finally notes identifying investment activities and financing items In the case of items other than what has been identified are included in operational activities.

Direct & Indirect methods used to prepare cash flow statements

b) Direct and Indirect method 

the right answer is B the second choice direct and indirect methods 

thanks

 b. Direct & Indirect

Systematic & Currently approved preparation of Cash flow if the INDIRECT Method.

There is an indirect and a direct method for calculating cash flows from operating activities.

The Direct Method

For items that normally appear on the income statement, cash flows from operating activities display the net amount of cash that was received or disbursed during a given period of time. The direct method for calculating this flow involves deducting from cash sales only those operating expenses that consumed cash. In this method, each item on an income statement is converted directly to a cash basis, and each cash effect is directly reported. To employ this direct method, use the following equation:

add net sales

add ending accounts receivable

subtract beginning accounts receivable

add ending assets (prepaid rent, inventory, et al)

subtract beginning assets (prepaid rent, inventory, et al)

subtract ending payables (tax, interest, salaries, accounts payable, et al. )

add ending payables (tax, interest, salaries, accounts payable, et al. )

Once the cash inflows and outflows from operating activities are calculated, they are added together in the "Operating Activities" section of the cash flow statement to obtain the net cash flow for a company's operating activities.

Indirect Method

In the indirect (addback) method for calculating cash flows, the accrual basis net income is established first. This net income is then indirectly adjusted for items that affected the reported net income but did not involve cash. The indirect method adjusts net income (rather than adjusting individual items in the income statement) for the following phenomena: changes in current assets (other than cash), changes in current liabilities, and items that were included in net income but did not affect cash.

 b.   Direct & Indirect method

indirect method and direct method are the two methods for preparing cash flow statements

Direct Method & Indirect Method

b. Direct & Indirect

He found two methods of preparing the cash flows are the direct method and the indirect method. Znserd here and style is direct, which makes the list is subject to the understanding of which are as follows:

1. We start a net profit from the reality of the income statement and then add him depreciation (where it is not concerned with a carrying expenses and the flow of real) where previously deducted from revenue to get to the net profit. Here we are over the role of the income statement and then get into the statement of financial position and of course there must be compared with the figures last year.

2. extract net cash flows from operating activities (changes between the current year and prior to working capital any current assets and current liabilities excluding cash and cash equivalents) as follows:

In addition inferiority change in assets and change it poses the increase in the assets of inferiority because the change in asset means generate cash inside the company. And deducted inferiority change in current liabilities and the change is added to the increase in liabilities of inferiority because the change in opponents means cash-out.

To become net cash flow from operating as follows:

Increase in inventories - notes he continued

Decrease in accounts receivable +

The increase in credit balances + notes that commitment

Statement of cash flow (CF) can be prepared by 

Direct method

or Indirect method