Search results
Results From The WOW.Com Content Network
The indirect method is one of two accounting approaches used to create a cash flow statement. It uses increases and decreases in balance sheet line items to modify the operating section...
What is the Cash Flow Statement Indirect Method? The indirect method for the preparation of the statement of cash flows involves the adjustment of net income with changes in balance sheet accounts to arrive at the amount of cash generated by operating activities.
The statement of cash flows prepared using the indirect method adjusts net income for the changes in balance sheet accounts to calculate the cash from operating activities.
The statement of cash flows is prepared using the four steps described in the previous segment. In step 1, the indirect method starts with net income in the operating activities section and makes three types of adjustments to convert net income to a cash basis.
Using the indirect method, operating net cash flow is calculated as follows: Begin with net income from the income statement. Add back noncash expenses, such as depreciation, amortization, and depletion.
The indirect method, one of two approaches to crafting this statement, offers insights into operational efficiency and fiscal sustainability by adjusting net income for non-cash transactions and changes in working capital.
The indirect method starts with your net income and adds or subtracts the items based on changes in their balances. Remember the operating activities that affect cash flow: Description