Prepare a cash flow statement for Sage Corporation for 2012, using the indirect
ID: 2567280 • Letter: P
Question
Prepare a cash flow statement for Sage Corporation for 2012, using the indirect method. 23. A major controversy in the issuance of Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," centered around the possibility of the Board's requiring the direct method of reporting operating cash flows. Bankers who responded to the Exposure Draft preceding the issuance of the pronouncement on cash flows expressed a preference for the direct method. Practicing CPAs have been shown in studies to favor the indirect method. The Board has allowed both the indirect and direct methods to be used, although the Board expressed a preference for the direct method Please list at least one strength and one weakness of the direct and indirect methods Which method is easiest to prepare for the Statement of Cash Elows2Explanation / Answer
* Strength of the Direct Method Cash Flows.
1. Easy To Prepare and Very Help for the Small Buiness Enterprises to prepare their Future Cash flows.
2. A sum up all the Business Transation in the Direct Method.
* Weakness of the Direct Method Cash Flows.
1. Unable to Track the Cash inflow and Out Flow if Volume of the business is high.
* Strength of the Indirect Method Cash Flows.
1. In this Method any one can find the net inflow and outflow the cash in an organisation by various classification available in Indirect Method.
* Weakness of the Indirect Method Cash Flows.
1. Very Time Consuming and Complex to P.repare.
The Easiest Method to Prepare the Statment of Cash Flows is DIRECT METHOD. But the Various Laws and Professional Are Suggesting the INDIRECT METHOD for the same.