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….

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 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

Particulars

Amount ((₹)

Amount (₹)

 

 

 

I.                   Cash flows from operating activities

 

 

 

 

 

1.     Cash Receipts

 

 

– Cash Received from the customers

440,000

 

 

 

. 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 31st 20XX

 

530,000

 

 

 

 

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