Indirect method
In accounting, indirect method means presenting operating cash flows by starting from net income and adjusting for non-cash items and changes in working capital — the method most entities use. ASC 230 also calls it the reconciliation method.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 1
- Nearby
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Authority
This definition follows ASC 230-10-45-28.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.
- Cash flow statement explained: why profit isn’t cashHow the cash flow statement starts at net income, adds back non-cash costs and working capital, splits three activities and ties to the balance sheet.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- cash reconciliation (a bank reconciliation is a different control)
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Components that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render reconciliation, net income.
1Primitives
Family spec5Ledger & tables
Family spec7Dashboard & charts
Family spec10Receivables (AR)
Family spec13Metrics & analysis
Family specNearby in the catalog
Components in this part of the system that no term names outright. A weaker claim than the list above, and stated as one — but a component nothing links to is a component nobody finds.
7Dashboard & charts
Family specTerms this one depends on
- Working capitalWorking capital is a liquidity and working-capital metric, calculated as Current assets − Current liabilities.
- ReconciliationComparing our record to an external party's
- Net incomeRevenues and gains less expenses and losses, including income tax, for the period — the bottom line of the P&L, before any allocation to non-controlling interests
Also in Statements
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.