Operating cash flows are generally associated with revenues and expenses. Operating activities is the default classification, so if a cash flow does not belong in either of the following two classifications, it belongs in this classification. Operating activities are an entity’s primary revenue-producing activities.
The use of classifications is intended to improve the quality of the information presented. In the statement of cash flows, cash flow information is reported within three separate classifications. The indirect method is used by nearly all organizations, since it is much easier to derive from the existing accounts. There are two variations on the template for this report, which are the direct method and the indirect method. The cash flows of a business are reported on the statement of cash flows.
