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

  1. To know the actual cash flow from different activities.
  2. To do short-term planning of the business
  3. It helps the business to know the liquidity
  4. To manage cash efficiently
  5. Compare the budget of the current year and the previous year
  6. 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

  1. Cash Flow from Operating Activities
  2. Cash Flow Investing Activities
  3. Cash Flow from Financing Activities

Format of the Direct Method of Cash Flow Statement

Direct method [As per AS-3]

For the year ending….


Amount (₹)

Amount (₹)




I.                   Cash Flow Operating Activities



1  Cash Receipts from :



– Sales



– Commission and fees



– Interest Received






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 1st Jan/April 20XX



– Cash on 31st 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


Amount ((₹)

Amount (₹)




I.                   Cash flows from operating activities






1.     Cash Receipts



– Cash Received from the customers





. Cash Payments 



– To suppliers



– To employees



– For interest 



– For income taxes



– Net cash operated from the operating activities






II.                Cash flows from Investing activities






– Purchase of equipment, plant, machinery, property and stock



– Net cash operated from the investing activities-







III.              Cash flows from financing activities:






– Insurance of common stock



– Net cash operated from the financing activities –






– Net increase in the cash



– Cash, Jan 1 20XX



– Cash, Dec 31st 20XX