Financial Accounting Terms

Financial - Indirect method depreciation expense and losses added back b/c WERE SUBTRACTED IN DERIVING NET INCOME and DO NOT REQUIRE OUTFLOW OF

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Financial Accounting Key Terms Exam 1: Accrual based net income: best measure of company’s profitability Direct and indirect methods Cash flows from INVESTING activities are both outflows and inflows of cash caused by the acquisition and disposal of assets Both provide info that helps forecast a company’s ability to generate cash STATEMENT OF CASH FLOWS provides info about cash receipts and disbursements Issuing stock to owners is classified as a FINANCING activity Significant non Depreciation expense added back to net income depreciation represents a NONCASH reduction to net income Net income is first amount listed in indirect method to prepare operating activities of state of cash flows
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Unformatted text preview: Indirect method depreciation expense and losses added back b/c WERE SUBTRACTED IN DERIVING NET INCOME and DO NOT REQUIRE OUTFLOW OF CASH Purpose of adjusting net income for changes to a certain balance sheet CONVERT ITEMS INCLUDED IN NET INCOME TO CASH US GAAP allows significant non cash investing and financing reported IN THE NOTES TO FINANCIAL STATEMENTS and ON THE FACE OF THE STATEMENT OF CASH FLOWS A DECREASE in accounts receivable is added to net income in the OPERATING activities section of the statement of cash flows An INCREASE in accrued liabilities, such as interest payable, will be added to net income when determining net cash flow from operating activities...
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This note was uploaded on 11/23/2011 for the course ACCT 2103 taught by Professor Burnett during the Fall '08 term at Oklahoma State.

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