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Indirect Method Format: Cash Flow from Operating Activities: Net Income $xxxx Add (Subtract) items that affect net income and cash flows differently: Depreciation, Depletion, Amortization (+) xxxx Gain on sale of plant asset (-) ( xxxx) Loss on sale of plant asset (+) xxxx Decrease in current assets (+) xxxx Increase in current assets (-) ( xxxx) Why use direct method cash flow statement: The listing of above payments gives the financial statement user a great deal of information as to where receipts are coming from and where payments are going to. This is one of the main advantages of the direct method compared with the indirect method. Investors, creditors, and management can actually see where the company is collecting funds from and whom it is paying funds to The indirect method of cash flow statement is a format used to report cash transactions. This format starts with net profits or losses obtained from the income statement. Then, it adjusts for non-cash transactions and other items to that amount. Subsequently, it involves reporting cash flows in three areas. These include operating, investing, and financing activities. Direct method of cash flow statement format There is an indirect and direct method for calculating cash flows from operational activities. Explain the direct method to prepare the declaration of cash flows Key key points In order to identify flows and defluxes for operational activities, it is necessary to analyze the components of the economic account. Under the direct method, the adjustments are made to