This video shows how to calculate the cash received from customers for the operating section of the Statement of Cash Flows when a company uses the direct method.

You obtain the cash received from customers by converting the sales revenue from the Income Statement to a cash-basis. This is done using the following formula:

Cash Received from Customers = Sales Revenue + Decrease in Accounts Receivable – Increase in Accounts Receivable + Increase in Unearned Revenue – Decrease in Unearned Revenue