Question

Describe the differences and similarities between a cash flow statement prepared using the indirect method and one prepared using the direct method.

Answer 1

Difference between direct and Indirect cash flow statement

Indirect Method	Direct method
It is uses net income as a base.	It is uses only the cash Transaction.
Net income is automatically converted in the form of cash flow.	Reconciliation is done to separate the cash flow from others.
All the factors are taken into account.	All non cash transaction are not taken.
It takes less time as compared to direct method.	It takes more time as compared to indirect method.
This method is used by many companies.	This method is used by few companies.