Cash Flow Statement - Direct Method

The video tutorial from Let'sTute Accountancy covers the preparation of cash flow statements, focusing on the direct method. It begins with a recap of cash flow activities and introduces the direct and indirect methods. The direct method is explained in detail, highlighting how cash inflows and outflows are recorded. An example using XYZ Limited is provided to demonstrate the application of the direct method. The session concludes with a preview of the next session, which will cover the indirect method.

What are the three primary classifications of cash flow activities?

• Operating, Investing, and Financing

• Investing, Financing, and Marketing

• Operating, Marketing, and Financing

• Operating, Investing, and Marketing

Which method involves disclosing major classes of cash receipts and payments?

• Indirect Method

• Direct Method

• Cash Basis Method

• Hybrid Method

In the direct method, what is deducted from cash generated from operating activities to find net cash flow?

• Loan Repayment

• Depreciation

• Income Tax Paid

• Interest Expense

What is the net cash flow from operating activities for XYZ Limited after deducting income tax?

• $30,000

• $23,000

• $50,000

• $100,000

Which transaction is classified under cash flow from investing activities?

• Purchasing machinery

• Salaries paid to employees

• Issuing equity shares

• Repayment of loan

What is the net increase in cash flow for XYZ Limited in the example provided?

• $123,000

• $50,000

• $23,000

• $100,000

What will the next session focus on?

• Hybrid Method

• Cash Basis Method

• Direct Method

• Indirect Method