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aimtobeacpa
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| Posted: 01 Nov 2010 at 13:56 | IP Logged
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in scf,some items are reported in only direct method and not in indirect method eg income tax paid,collections on loans to customers"(interest portion)
and some items are included in both format eg amortization of bond disc,divedend paid..
i am not able to distinguish....how do we decide tht some items are only in direct while some are in both..
Appreciate your help!thanks..
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Zeratul
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| Posted: 01 Nov 2010 at 14:50 | IP Logged
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You really need to treat direct and indirect method as two different reports which provide the same information.
The indirect report is a reconciliation of net income to cash provided (or used) by operating activities.
The direct report is a report of how much cash was recieved by or given to various parties.
There are adjustments which are added in the indirect method which would be subtracted in the direct method and vice versa. Really the best thing is just to understand both methods on their own, rather than trying to focus on commonalities.
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aimtobeacpa
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| Posted: 01 Nov 2010 at 16:11 | IP Logged
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its actually in one of sims
| Item | Inclusion in SCF Depending on Format |
| Proceeds from sale of land held as an investment | Both formats |
| Change in wages payable for the period | Both formats |
| Income taxes paid | Direct format only |
| Payments for insurance premiums | Direct format only |
| Real estate taxes paid | Direct format only |
| Change in income taxes for the period | Both formats |
| Patent amortization | Both formats |
| Cost of goods sold | Does not appear in SCF |
| Proceeds from sale of long-term investment in bonds | Both formats |
| Collections on loans to customers (principal portion) | Both formats |
| Collections on loans to customers (interest portion) | Direct format only |
| Dividends paid | Both formats |
| Amortization of bond discount | Both formats |
| Proceeds from sale of land used as a parking lot for the firm's customers | Both formats |
| Purchase of securities appropriately classified as cash equivalents | Does not appear in SCF |
here i got confused....how to distinguish?
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BEC-74,82(lost credit),78
FAR-67,80
AUD-75
REG-68,72,79
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lauritta
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| Posted: 29 Oct 2011 at 15:08 | IP Logged
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Can anybody help with this question? I understand how to use both methods. But this sim confuses me as well. Thank you!
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divyagovil1
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| Posted: 31 Oct 2011 at 06:34 | IP Logged
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Remember, direct and indirect method ONLY affects
calculation of net cash flow from OPERATING ACTIVITIES.
So, any changes in cash flow from investing and
financing activities would be common in both direct and
indirect method.
DIRECT METHOD (Income Statement Method)
The direct method for creating a cash flow statement
reports major classes of gross cash receipts and payments
from operating activities
INDIRECT METHOD (Reconciliation Method)
The indirect method starts with net income and converts
it to net cash flow from operating activities. In other
words, the Indirect method adjusts net income for items
that affected reported net income but didn't affect cash.
To compute net cash flows from operating activities,
noncash changes in the income statement are added back to
net income, and net cash credits are deducted
Investing and Financing activities: Determine Net Cash
Flows from Investing and Financing Activities:
Once the net cash flows from operating activities is
computed, the next step is to determine whether any other
changes in balance sheet accounts caused an increase or
decrease in cash.
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Ethics - 2011
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Topic: scf
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