如何通过direct/indirect method准备SCF（总结）

direct：

Start with Net Income

1.Adjustments to accrual-basis net income：

Add non cash loss; Less non cash gain; (of operating activities)

Net cash provided by operating activities

2.Add gains & Less loss from investing activities

-Net cash used by investing activities

3.Add gains & Less Loss from financing activities

-Net cash used by financing activities

End with Net Increase in Cash

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CONCLUSION：

Differences between direct and indirect only exist when accounting for operating activities

As for Direct Method, one has to deduct inversely to get cash collected from customers and cash paid to suppliers or when other corresponding payable accounts exist, while other cash payments are directly given. Besides, all items of operating activities are listed clearly in the SCF.

When it comes to Indirect Method, one can only deduct inversely from NI to get the total amount of cash disbursed in operating activities, while the specific number of each items remain unclear due to the lack of information.

Process of Direct Method:

Cash flows from operating activities:

    cash collections from customers                       Sales -Delta(A/Rs)

 Cash Payment

    To suppliers                                         COSG+Delta(Inventory)-Delta(A/Ps)

    To employees

    For operating expense                       

    For interest

    For tax

   Cash disbursed for operating activities

Process of Indirect Method:

cash flows from operating activities:

Net Income/Net earnings

Adjust for items do not belong to operating activities??

        not considered for now

Reconcile non cash related activities:

Add: Depreciation & Amortization

Reconcile changes in non cash items:

Less:Accounts Receivable

Add:Accounts Payable

Less: Inventory

Add: Other non cash liabilities

Less: Other non cash assets

Net Cash Provided by Operating Activities

     CFI & CFF should be prepared based on additional information by direct method!      

Net Revenue=Net sales       =/=       Net Earnings=Net Income