Under the direct method, the cash flows from operating activities will include the amounts for lines such as cash from customers and cash paid to suppliers. In contrast, the indirect method will show net income followed by the adjustments needed to convert the total net income to the cash amount from operating activities.
The direct method must also provide a reconciliation of net income to the cash provided by operating activities. (This is done automatically under the indirect method.)
Nearly all corporations prepare the statement of cash flows using the indirect method.
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