Financial Rporting

Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

Financial Rporting

Postby chandniwadhwani92 » Mon Dec 22, 2014 7:11 pm

Start with net income.
Add back non-cash expenses.
(Such as depreciation and amortization)
Adjust for gains and losses on sales on assets.
Add back losses
Subtract out gains
Account for changes in all non-cash current assets.
Account for changes in all current assets and liabilities except notes payable and dividends payable.

my quetion
why all these adjustment takes place in calculating indirect method of cash flow
can u plz describe effect of each item

Finance Junkie
Posts: 704
Joined: Wed Apr 09, 2014 6:28 am

Financial Rporting

Postby edupristine » Tue Dec 23, 2014 8:29 am

In cash flow statement we only consider income and expenses in cash, Hence by calculating cash flows(operating,investing,financing) we subtract non-cash incomes and add back non-cash expenses from net income.

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