Ask Experts Questions for FREE Help!
  Advanced
Register  |  Log in  
   Ask    
 Answer  
  Help  

Ask QuestionsprogressAnswer QuestionsprogressBuild ReputationprogressBecome an Expert
 
Free Answers in 3 Easy Steps

Register Now
3 Steps

At Ask Me Help Desk you can ask questions in any topic and have them answered for free by our experts. To ask questions or participate in answering them you must register for a free account. By registering you will be able to:
  • Get free answers from experts in any of our 300+ topics.
  • Accept money for answers that you provide.
  • Communicate privately with other members (PM).
  • See fewer ads.

Home > Business & Careers > Accounting   »   indirect method of cash flows

 
Question Tools Search this Question Display Modes
Question
 
 
#1  
Old Feb 24, 2008, 09:06 AM
meanqueencobra
New Member
meanqueencobra is offline
 
Join Date: Feb 2008
Posts: 1
meanqueencobra See this member's comment history on his/her Profile page.
indirect method of cash flows

I need an example of an indirect method of completing a statement of cash flows please...thanks.

Reply With Quote
 
     

Answers
 
 
Old Feb 24, 2008, 08:49 PM   #2  
morgaine300
Accounting Expert
morgaine300 is offline
 
Join Date: Feb 2008
Posts: 1,396
morgaine300 See this member's comment history on his/her Profile page.
Difficult to give you an examples because a cash flow can be very large, and because it just depends on what information you have.

What I can do is give you the rules for the indirect method for the operating section. When they refer to direct and indirect, they are only referring to the operating section, as the investing and financing are always direct. (Whether they say so or not.)

You start with the net income off the income statement and make the following adjustments to it:
1) Depreciation and amortization: ADD
2) Gains, SUBTRACT, losses ADD
3) Current Assets: SUBTRACT increases in balance, ADD decreases in balance
4) Current Liabilities: ADD increases in balance, SUBTRACT decreases in balance

To make that a bit easier to memorize... The first two sets are income statement accounts. You're trying to get rid of them. If it was an expense/loss, it would have been a negative on the income statement. So to get rid of it, you'd have to do the opposite: add. Gains are positive on the income statement, so again to get rid of it, do the opposite: subtract. i.e. these are always doing the opposite of what they did on the income statement.

The third and fourth set are balance sheet accounts. The current assets go the opposite direction as the balance did. If it went up, you go down.

Notice that so far everything has been an "opposite." With the one exception of current lliabilities. They go the same direction as the balance change did. If it went up, you go up also. So I memorize this as being the exception.

Notes: One, do not include cash in the current assets, because the entire statement is cash flow and will take care of cash itself. Two, do not include dividends payable in the current liabilities, because it's actually a financing activity, being related to stock, so it doesn't belong in operating. But otherwise this should work.
  Reply With Quote
 
     


Question Tools Search this Question
Search this Question:

Advanced Search
Display Modes

 
Similar Sponsors

Similar Questions
Question Asker Topic Answers Last Post
cash flows lizsublime Finance 0 Feb 6, 2008 07:18 PM
indirect method cash flow stayhomemom Finance & Accounting 0 Nov 8, 2007 08:40 PM
Preparing cash flow statement in indirect method nhantrangngantam Accounting 1 Jul 11, 2007 08:46 AM
how do i prepare an indirect statement of cash flow pheonix Accounting 1 May 23, 2007 11:19 PM
CASH FLOW INDIRECT METHOD (i will appreciate any effort) rain_bow0 Accounting 2 Dec 14, 2006 10:16 PM




Copyright ©2003 - 2007, Ask Me Help Desk.
All times are GMT -8. The time now is 12:51 AM.

Content Relevant URLs by vBSEO 3.0.0 RC6 © 2006, Crawlability, Inc.