Introduction
The direct method for forming a cash flow statement shows the main categories of total cash receipts and aggregate payments. The simplest way to present the components of received cash and cash payments is by arranging operating cash in such a way the operating cash reconciliations take a separate list. Also, the method has additional items under the operating cash flow section including. For instance, the IAS 7 displays the received dividends under the operating activities. The tables below show the direct cash flows for Aden Group Inc. and Consolidated Subsidiaries.
The significant items in the direct cash flow above are the cash flow from operating activities, financing activities and investing activities. The operating activities include sales and purchases, paid dividends and received payment of salaries and wages. The financing activities include the cash paid to shareholders as dividends. The investing activities are capital expenditures, purchase of an investment, sales of an investment, proceeds from the sale of assets, equipment, plant and net cash provided by (used) in investing activities.
The significant cash flow items on the statement above include cash inflows and cash outflow. Cash inflow from operating activities, financing activities adds to the cash and cash equivalent at the beginning of the year. The total cash is flowing out balance the sum of the opening cash and cash equivalents.
Conclusion
The direct cash flow indicates the operating cash flows, investing cash flows and financing cash flows. Another way of arranging of the direct cash flow is placing together the cash inflow together and clustering the cash outflow. The different components of cash flows fall under the two categories of cash inflows and cash outflows.
References
Belghitara, Y., & Ephraim Clarkb. (2015). Managerial risk incentives and investment related agency costs. International Review of Financial Analysis, 191–197.
Orpurt, S. F., & Zang, Y. (2007). Do Direct Cash Flow Disclosures Help Predict Future Operating Cash Flows and Earnings? Journal of accounting , 1-50.
