Accounting For Cash Flow – Indirect Vs Direct Methods

There are two main ways of accounting for cash flow: the indirect and direct methods. Direct method involves totaling individual cash transactions and excluding non-cash ones. In this way, the monthly bank statement is as pure as it gets. Indirect method is the more popular one among businesses. This method requires a lot of time to prepare and is less accurate. Direct method involves analyzing and separating all cash transactions in a systematic way. Hence, it is the preferred method among many companies.How Credit Card Cash Advances Work & What to Do Instead

While most people will receive their direct cash payments via direct deposit, it is important to notify the IRS if you recently moved or if your address has changed. Similarly, the Economic Impact Payment (EIP) is not taxable and does not disqualify an American from receiving unemployment benefits Direct cash
. The direct cash payment is a valuable lifeline for Americans during tough economic times. More information about COVID-19 payments can be found HERE. A representative will be able to tell you more about your eligibility for direct cash payments.

The Youth Cash Transfer Study aims to assess the impact of youth cash transfer programs, which have relatively little research. It is the first of its kind and a partnership between Rooted schools and the University of Pennsylvania’s Center for Guaranteed Income Research. It was funded by New Orleans-based education nonprofit 4.0 Schools. The study is the first to use direct cash transfers in a school setting. The results from the study will determine whether or not these programs are effective.

Research shows that cash transfers are more effective than food aid. In extreme poverty, cash supports the expansion of human and physical capital, making it a much more sustainable method of reducing poverty. The benefits of these programs are enormous, and the impact on local people is significant. Direct cash transfers, in some cases, have even surpassed those of food aid in reducing the incidence of child mortality and maternal mortality. For many low-income countries, this support is an absolute lifeline.

Indirect method of cash flow accounting starts with net income and adjusts it to reflect the cash transactions. Direct method of cash flow accounting uses only cash transactions. Net income automatically turns into cash flow statement. However, the indirect method requires more time for preparations, and the results are not as accurate. However, the direct method is the more accurate way to calculate cash flow in the business. A direct method helps the government get to identified beneficiaries, and plugs the leakages. Some ration shop owners divert subsidised PDS grains and kerosene to the open market.

While the indirect method involves using net income, the direct method focuses on cash from operations. It includes cash received from customers and suppliers, as well as payments for salaries and income taxes. The direct method ignores non-cash transactions, such as dividends. It is a simpler method to prepare than the indirect one. However, this method is less convenient for businesses. Many organizations keep their records on the accrual basis. For more details on both methods, consult the following links:

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