Which statement of cash flow reporting method reports gross cash receipts and payments and separates interest income and interest expense?

Which statement of cash flow reporting method reports gross cash receipts and payments and separates interest income and interest expense?

• A. Indirect method
• B. Direct method
• C. Supplementary method
• D. Pro forma method

Answer: (B)

Direct method presents operating cash flows as gross cash receipts and payments, providing a detailed breakdown of cash inflows and outflows. It shows cash received from customers, cash paid to suppliers, and other operating payments, and it can list interest income separately from interest expense, keeping those items distinct. This contrasts with the indirect method, which starts with net income and adjusts for noncash items and working capital changes, so it doesn’t present gross operating receipts and payments. Supplementary or pro forma methods aren’t standard approaches for presenting cash flows in this way.

Direct method presents operating cash flows as gross cash receipts and payments, providing a detailed breakdown of cash inflows and outflows. It shows cash received from customers, cash paid to suppliers, and other operating payments, and it can list interest income separately from interest expense, keeping those items distinct. This contrasts with the indirect method, which starts with net income and adjusts for noncash items and working capital changes, so it doesn’t present gross operating receipts and payments. Supplementary or pro forma methods aren’t standard approaches for presenting cash flows in this way.