Page 260 - F3 -FA Integrated Workbook STUDENT 2018-19
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Chapter 19
2.4 Cash flows from operating activities – indirect and direct methods
The indirect method of presenting cash flows from operating activities is based
upon information already available within the annual financial statements.
The direct method of presenting cash flows from operating activities is based upon
cash flow information extracted directly from the accounting records to classify cash
flows.
Indirect method $ Direct method $
Profit before tax X Cash receipts from customers X
Depreciation charge X Cash payments to suppliers (X)
Profit on disposal of PPE (X) Cash payments to employees (X)
Increase in inventories (X) Cash payments for expenses (X)
Decrease in receivables X
Increase in payables X
–––– ––––
Cash generated from X Cash generated from operating X
operating activities activities
Interest paid (X) Interest paid (X)
Income tax paid (X) Income tax paid (X)
–––– ––––
Net cash flow from X(X) Net cash flow from operating X(X)
operating activities activities
–––– ––––
Illustrations and further practice
Now try questions TYU 1 Chapter 19 of the Study Text.
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