Chapter 16 in-class illustration

Chapter 16 in-class illustration - Conversion of Net income...

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Indirect Method Items Explanation Net income, accrual basis From income statement Add (subtract) to convert to cash basis + Depreciation and amortization expense The expense does not affect cash +Loss on disposal of assets - Gain on disposal of assets The loss does not affect cash but decrease net income The gain does not affect cash but increase net income + A/R - A/R Cash collected from customers is more than accrual basis revenue Cash collected from customers is less than accrual basis revenue + Inventory - Inventory Purchase are less than cost of goods sold Purchase are more than cost of goods sold + Prepaid expense - prepaid expense Cash prepayments for expense are less than accrual basis expense Cash prepayments for expense are more than accrual basis expense + A/P - A/P Cash payments to suppliers are less than amounts purchased Cash payments to suppliers are more than amounts purchased + Accrued expenses - Accrued expense
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This note was uploaded on 03/12/2012 for the course BUSI 1002 taught by Professor Liu during the Winter '10 term at HKU.

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Chapter 16 in-class illustration - Conversion of Net income...

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