Cash Flow Statement Direct Method Format

The direct method of cash flow statement is used to find out the net cash inflow and outflow that is affecting the cash flow of a business during an accounting period.

It discloses the operating cash receipts and payments. The format of the cash flow statement direct method is a little complex, and therefore most companies use the indirect method to calculate their net outflow and inflow.

However, the direct method is straightforward as it shows the gross cash receipts and payments.

Further, we will be discussing in detail the cash flow statement, the format, and also few examples of the direct method.

What is a Cash Flow Statement?

It is a financial statement that sum ups with the actual amount of cash and the equivalent and adjusts the income statement to know the net inflow and outflow of cash.

An example of a cash flow statement is spending cash on the purchase of a vehicle. Thus, this will be recorded in the cash from the investing activities as mainly the outflows of cash are involved with the investing activities.

Objectives of the Cash Flow Statement

To know the actual cash flow from different activities.
To do short-term planning of the business
It helps the business to know the liquidity
To manage cash efficiently
Compare the budget of the current year and the previous year
To know the cash position of the business, whether in profit or loss.

Differences between the direct and indirect method

The direct method calculates the actual inflow and outflow of cash in a business. Whereas, the indirect method calculates the flow of cash by adding or subtracting the asset and liabilities from the net income/loss statement.
The cash flow is computed on a cash basis in the former, but the latter is computed on an accrual basis.
The direct method is more complex as compared to the indirect method.

Classification of Business Activities

Cash Flow from Operating Activities
Cash Flow Investing Activities
Cash Flow from Financing Activities

Format of the Direct Method of Cash Flow Statement

Direct method [As per AS-3]

For the year ending….

Particulars	Amount (₹)	Amount (₹)

I. Cash Flow Operating Activities
1 Cash Receipts from :
– Sales	___
– Commission and fees	___
– Interest Received	___
Total:		___
2 Cash payments for:
– Purchases	___
– Payments to and for employees	___
– Operating Expenses	___
– Interest payments	___
– Direct Taxes paid		___
*Net Cash Flow from Operating Activities		___

II. Cash Flow from Investing Activities
– Additions to equipment	___
– Loan to another company	___
*Net Cash Flow from Investing activities		___
III. Cash Flow from Financing Activities
– Proceeds from capital contributed	___
– Drawing	___
– Proceeds from loans	___
– Payment of loan	___
*Net cash flow from Financing Activities		___

Net Increase or decrease in the cash	___

– Cash on 1^st Jan/April 20XX	___
– Cash on 31^st Dec/March 20XX	___

An example of the Cash Flow Statement Direct Method

ABC Company Statement of Cash flow
For the year ending 31st March, XXXX

Particulars	Amount ((₹)	Amount (₹)

I. Cash flows from operating activities

1. Cash Receipts
– Cash Received from the customers	440,000
–
₂. Cash Payments
– To suppliers	70,000
– To employees	120,000
– For interest	12000
– For income taxes	9,000
– Net cash operated from the operating activities		229,000

II. Cash flows from Investing activities

– Purchase of equipment, plant, machinery, property and stock	(300,000)
– Net cash operated from the investing activities-		(300,000)

III. Cash flows from financing activities:

– Insurance of common stock	100,000
– Net cash operated from the financing activities –		100,000

– Net increase in the cash		29,000
– Cash, Jan 1 20XX		501,000
– Cash, Dec 31^st 20XX		530,000