# CMA Study Group

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## Indirect method for calculating operating cash flow.

• #### 1.  Indirect method for calculating operating cash flow.

Posted 13 days ago
Hi All,
Can someone explain how to calculate operating cash flow using the indirect method?
reference question :
Ironwood Company's net income is \$399,000. During the year accounts receivable increased \$196,000 and accounts payable decreased \$56,000. Using the indirect method of preparing the statement of cash flows, what amount will be reported as cash provided by operating activities?
answer - 147000

Regards,

• #### 2.  RE: Indirect method for calculating operating cash flow.

Posted 12 days ago
Ironwood Company's net income is \$399,000. During the year accounts receivable increased \$196,000 and accounts payable decreased \$56,000. Using the indirect method of preparing the statement of cash flows, what amount will be reported as cash provided by operating activities?

net income is \$399,000-(accounts receivable increased \$196,000)-(accounts payable decreased \$56,000)
399000-196000-56000=147000

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HOSSAM FATHI
Vice President
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• #### 3.  RE: Indirect method for calculating operating cash flow.

Posted 12 days ago
dear

For  cash flow calculation keep below in mind

Asset-when asset decreases u need to add back to net income-When Asset increase reduce from net income
liability-When decrease reduce from net income-when increased add to net income

So in this que
3,99000-196000-56000=147000

I hope this help

Regards
Farzeen Ahmed

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Farzeen Ahmed
Accountant
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• #### 4.  RE: Indirect method for calculating operating cash flow.

Posted 12 days ago
Format for Indirect method Cashflow. (operating)

Net Income
Add :
No Cash items (Depreciation, Amortization, Provisions)

Adjust:
Non Operating Gains and Losses(Finance or Investing)

Add:
Changes in Working Capital.

Cashflow from Operations.

Increase in Accounts receivables means Compared to last year we have more credit sales, so less cash inflow. So the net income 399000/- we were suppose to realize in cash but received only (399000-196000) = 203000/-

Decrease in Accounts payable means compared to last year we have less credit purchase, So more cash outflow. So out of the  net cash we received (203000/-) we will pay 56000/- . So net Cash is 147000/-

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Mohammed Nadeem
Accountant
Vi Sigma Apparel Group FZE
Abu Dhabi
United Arab Emirates
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• #### 5.  RE: Indirect method for calculating operating cash flow.

Posted 12 days ago
Thank you all!
Your explanations truly help.

Best Regards