Indirect method
Indirect method is one of two methods of preparing the net cash flow from the operating activities section of the statement of cash flows. Involves converting the accrual basis net income figure from the income statement to the net cash flows from operating activities.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Indirect method. One of two methods of preparing the net cash flow from the operating activities section of the statement of cash flows. Involves converting the accrual basis net income figure from the income statement to the net cash flows from operating activities.
According to Managerial Accounting by Braun, Tietz (5th edition),
- Indirect method. A method of presenting the cash flows from operating activities that begins with the company's net income, which is prepared on an accrual basis, and then reconciles it back to the cash basis through a series of adjustments.
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
