16 - Add increases to net income; subtract decreases...

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Reconciling Items Goal: To convert accrual net income to operating cash flow Start with net income and adjust for noncash items Add back noncash expenses Subtract gains and add losses These amounts do not reflect cash flows Add or subtract changes in current assets and current liabilities Current Assets and Current Liabilities Each account relates to an income statement item Accounts receivable Sales Salaries payable Salaries expense The change in each account is computed Change = Current year balance – prior year balance Current assets inverse relationship Subtract increases from net income; add decreases Current liabilities direct relationship
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Unformatted text preview: Add increases to net income; subtract decreases Preparing the Operating Section Indirect Method Use current year income statement for the following amounts Net Income Depreciation, depletion and amortization expense Gains or losses on sales of assets Use comparative balance sheets to compute the changes in current assets and current liabilities Investing Activities Affect long-term assets: Plant assets Investments Notes receivable Computing Purchases and Sales of Plant Assets Plant assets, net, beginning balance + Acquisitions-Depreciation-Book value of assets sold = Plant assets, net, ending balance...
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This note was uploaded on 06/14/2011 for the course ACCOUNTING 23020 taught by Professor Na during the Spring '11 term at Kent State.

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16 - Add increases to net income; subtract decreases...

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