PRACTICE TOPIC
Indirect Method Cash Flow
Practice Indirect Method Cash Flow with 18 accounting challenges on Accountely — instant IAS/IFRS-compliant scored feedback on every submission.
What indirect method cash flow covers
The indirect method starts from profit and works back to operating cash flow by removing non-cash items and the effects of accruals. Depreciation, amortisation, impairments and gains or losses on disposal are added back or deducted, then movements in working capital are applied. The total operating cash flow is identical to the direct method — only the presentation differs.
Challenges here give you profit, the movements in working capital and the non-cash adjustments, and ask for the reconciliation.
Where marks are usually lost
- Adding a gain on disposal instead of deducting it — the whole proceeds belong in investing activities.
- Getting the direction of a working capital movement backwards; a rise in inventory consumes cash.
- Leaving depreciation out of the add-backs.
Further readingDirect vs indirect method cash flow
18 Indirect Method Cash Flow practice challenges
TitleTypeDifficulty
Solstice SA - Operating Section, Simple Indirect Cash Flow Statement Cash FloweasySummit Logistics - Indirect Method Statement of Cash Flows (US GAAP) US GAAPCash FlowmediumAlderbrook SA - Complete Indirect Cash Flow Statement Cash FloweasyVantage SA - Simple Indirect Cash Flow - Operating Activities Cash FloweasyRavencroft Ltd - Indirect Method Statement of Cash Flows (IFRS) Cash FlowmediumCrescent Bay Marine - Indirect Cash Flow with a Gain on Equipment Disposal Cash FlowmediumPalisade Corporation - Indirect Statement of Cash Flows Cash FlowhardCobalt Freight - Indirect Cash Flow with a Loss on Sale (US GAAP) US GAAPCash FlowmediumMeridian Manufacturing Ltd. — Statement of Cash Flows (Indirect) Cash FlowmediumAtlas Manufacturing - Complete Cycle: Income Statement, Balance Sheet and Cash Flow Multi-StatementhardSilverbrook Holdings - Indirect Cash Flow with a Gain on Sale (IFRS) Cash FlowmediumPemberton Group - Indirect Method Statement of Cash Flows (US GAAP) US GAAPCash FlowmediumCobalt Ridge Ltd - Three Statements with a Non-cash Share Issue for Equipment Multi-StatementhardNorthgate Supplies Ltd - Year-End Close: Adjustments, Adjusted Trial Balance and All Three Statements Multi-StatementhardCase Study: Halden Logistics - Rebuilding the Vehicle Accounts and Preparing the Cash Flow Statement Multi-StatementhardNorthfield SA - Complete Cash Flow Statement Cash FlowhardZenith Industries Ltd - Complete Indirect Cash Flow Statement Cash FlowhardOrion Trading PLC - Complete Indirect Cash Flow Statement Cash Flowhard