Main purpose and element of the Statement of Cash Flow

Main purpose and element of the Statement of Cash Flow

1. DIRECT METHOD

   • Cash Received from customers
   • Cash Paid to suppliers
   • Cash paid to employees
   • Cash paid for operation expenses
   • Interest Paid
   • Taxes Paid
   • Dividends Paid
   • Net cash from operating activities

2. INDIRECT METHODS

   • The net cash flow from operating activities is determined by adjusting profit or loss for the effects of:
     • Changes during the period in inventories and operating receivables and payables
       • Non-Cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, and undistributed profits of associates
         • All other items for which the cash effects are investing or financing cash flows.

3. To provide information about a company's gross receipts and gross payments for a specified period of time.

   • The gross receipts and gross payments will be reported in the cash flow statement according to one of the following classifications: operating activities, investing activities, and financing activities
     • Operating: The sources and uses of cash in the operating section come from revenue, expenses, gains, losses, and other costs.
     • Investing: This section shows sources and uses of cash from debt and equity purchases and sales; purchases of property, plant, and equipment; and collection of principal on debt.
     • Financing: You report activities such as long-term liability (paying or securing loans beyond a period of 12 months from the balance sheet date) and equity items (sale of company stock and payment of dividends) in the financing section.