Question

To compare statement of cash flows reporting under the direct and indirect methods, indicate whether each item is used in the direct method or the indirect method.

a. Accounts payable
b. Payments to employees
c. Cash collections from customers
d. Accounts receivable
e. Payments to suppliers

Answer 1

Indirect Method

a. Accounts payable increase or decrease

d. Accounts receivable increase or decrease.

The above are both used in the Indirect method and fall under Cashflow from Operating activities.

Direct Method

b. Payments to employees

c. Cash collections from customers

e. Payments to suppliers

The direct method involves the above and they all fall under Cash generated from operations.