Question

the direct method of reporting operating cash flows:

Answer 1

The Direct method of report operating cash flows is starts with the Cash cash receipts from customers, the cahs paid to suppliers, wages and salaries paid to employees, Interest paid, Interest received and income tax paid.

There is a only difference of presenting operating cash flow in two methods Direct and Indirect. In indirect method we start with the Profit as per accounts and then deduct all the non cash items. But as per Direct method we only take into accoutns the actual cash received and paid for operating activities.

In direct method We take into consideration Cash receipts from Customer then we deduct Cash paid to suppliers and salaries paid to employees. Interest income and expense and Income tax paid are also adjusted. Please refer the below format-