CAT / FIA FFA Syllabus F. Preparing Basic Financial Statements - Direct Method - Notes 5 / 5
In the direct method, the cash records of the business are analysed for the period, picking out all payments and receipts relating to operating activities.
These are summarised to give the net figure for the cash flow statement.
Not many businesses adopt this approach as it can be quite time consuming.
However, this is the preferred method under IAS 7.
Statement of cash flows for the year ended 31 December 20x7 (DIRECT METHOD)
| $000 | $000 | |
cash flows from operating activities | ||
| cash receipts from customers | 30150 | |
| cash payments to suppliers and employees | -27600 | |
| -------- | ||
| cash generated from operations | 2550 | |
| interest paid | -270 | |
| income taxes paid | -900 | |
| -------- | ||
| net cash from operating activities | 1380 | |
| -------- |