ACCT20100 Chapter Notes - Chapter 12: Internal Revenue Code, Cash Flow, Income Statement
Document Summary
Reconciliation of net income to cash flow from operations (for direct method) So why do the direct method in the first place because you end up doing the indirect method anyway: 2. If a company uses the indirect method for computing cash flow from operations, it must disclose cash paid for income taxes and interest disclosures are normally listed at the bottom of the statement. There is a big difference between what is shown on the income statement and what the company actually pays to the government in taxes which is calculated according to the internal revenue code: 3. Important transactions, but do not have any cash flow effects. Supplemental disclosure of these transactions is required, in either narrative or schedule form. Example= purchase a building with a mortgage. Using the direct method: direct method: presents a summary of all operating transactions that result in either a debit or a credit to cash prepared by adjusting each item on the.