Question 1: to prepare statement of cash flow using direct method. Direct method generates the operating cash flow in a different format from the indirect that we discussed. Indirect method is a much more popular and common way of preparing statement of cash flow. The difference is, using indirect we reconcile net income to operating cash flow. Using direct, we directly indicate where the operating cash is from, then add them up. In question 1 (direct method), you need follow the following steps to find the cash from operating activities: Cash Receipts from customers Less: cash payments = Cash provided by Operating Activities Under \"cash payments\