Formula Of Cash Flow Direct Method
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Direct Method (Cash Flow) 1. Cash received from Customer / Cash Collection from A/R
Sales Revenue (Revenue Income) Add: decrease in Accounts Receivable Less: Increase in Accounts Receivable
2. Cash payment to suppliers / Cash paid to Accounts Payable
Cost of Goods sold Add: Increase in Inventory (i.e: Ending Inventory – Beginning Inventory) Less: Decrease in Inventory (i.e: Beginning Inventory – Ending Inventory) Add: Decrease in Accounts Payable (Beginning Accounts Payable – Ending Accounts Payable) Less: Increase in Accounts Payable (i.e: Ending Accounts Payable – Beginning Accounts Payable)
3. Cash Payment for Operating Expenses
Operating Expenses Add: Increase in Prepaid expenses Less: Decrease in Prepaid Expenses Add: Decrease in Accounts Expenses Payable Less: Increase in Accounts accrued expenses payable
4. Cash Payment for income taxes expense
Cash payment to income tax expenses Add: Decrease in income tax payable Less: Increase in income tax payable
5. Cash Payment for Interest Expenses
Interest Expenses Add: Increase in Prepaid interest Expenses Less: Decrease in Prepaid Interest Expenses Add: Decrease in Accrued interest Payable Less: Increase in Accrued interest Payable
6. Cash Payment for General Expenses
General Expenses Add: Increase in Prepaid Expenses Less: Decrease in Prepaid Interest Expenses Add: Decrease in Accounts Accrued payable Less: Increase in Accrued Payable
Sales Revenue (Revenue Income) Add: decrease in Accounts Receivable Less: Increase in Accounts Receivable
2. Cash payment to suppliers / Cash paid to Accounts Payable
Cost of Goods sold Add: Increase in Inventory (i.e: Ending Inventory – Beginning Inventory) Less: Decrease in Inventory (i.e: Beginning Inventory – Ending Inventory) Add: Decrease in Accounts Payable (Beginning Accounts Payable – Ending Accounts Payable) Less: Increase in Accounts Payable (i.e: Ending Accounts Payable – Beginning Accounts Payable)
3. Cash Payment for Operating Expenses
Operating Expenses Add: Increase in Prepaid expenses Less: Decrease in Prepaid Expenses Add: Decrease in Accounts Expenses Payable Less: Increase in Accounts accrued expenses payable
4. Cash Payment for income taxes expense
Cash payment to income tax expenses Add: Decrease in income tax payable Less: Increase in income tax payable
5. Cash Payment for Interest Expenses
Interest Expenses Add: Increase in Prepaid interest Expenses Less: Decrease in Prepaid Interest Expenses Add: Decrease in Accrued interest Payable Less: Increase in Accrued interest Payable
6. Cash Payment for General Expenses
General Expenses Add: Increase in Prepaid Expenses Less: Decrease in Prepaid Interest Expenses Add: Decrease in Accounts Accrued payable Less: Increase in Accrued Payable
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