![]() When not delineated separately, Accrued Expenses is classified as Accounts Payable/Accrued. An increase in accrued expenses has a positive impact on cash flow from operating activities, and vice versa. An increase in other assets has a negative impact on cash flow from operating activities, and vice versa.Īccrued Expenses Accrued Expenses represents changes in accrued expenses during the period. Other Assets Other Assets represents changes in other assets during the period. An increase in inventories has a negative impact on cash flow from operating activities, and vice versa. Inventories Inventories represents changes in inventories during the period. An increase in accounts receivable has a negative impact on cash flow from operating activities, and vice versa. Non-Cash Items Non-Cash Items represents the sum of: Accounting ChangeDiscontinued OperationsExtraordinary ItemsUnusual ItemsPurchased R&DEquity in Net Earnings/LossOther Non-Cash Items.Īccounts Receivable Accounts Receivables represents changes in accounts receivable during the period. Other Non-Cash Items Other Non-Cash Items represents noncash operating activities other than those included in: Depreciation/DepletionAmortizationDeferred TaxesAccounting ChangeDiscontinued OperationsExtraordinary ItemsUnusual ItemsPurchased R&DEquity in Net Earnings/LossOther Non-Cash Items also includes reversal of gains (losses) on the sale of fixed assets, which is intended to avoid double counting of gains/losses on the sale of noncurrent assets, such as fixed assets, long-term investments in securities, etc. Because the operating section of the cash flow pursues changes in cash flow from operating activities, any unusual gain/loss included in net income computation needs to be reversed. Unusual Items Unusual Items is applicable only if Net Income/Starting Line is income after gains/losses from unusual activities. Depreciation/Depletion is usually the largest non-cash expense factored into net income under the Indirect Cash Flow Method.ĭeferred Taxes Deferred Taxes represents income taxes, accounted for in a company’s net income computation on its income statement, but not affecting the cash flow position. ![]() Depreciation also represents the amount of expense charged against earnings by a company to write off the cost of a plant or machine over its useful life, giving consideration to wear and tear, obsolescence and salvage value.ĭepreciation/Depletion Depreciation/Depletion represents the sum of Depreciation and Depletion. Particularsīy Profit & Loss Account(Depreciation charged during the year).Net Income/Starting Line Net Income/Starting Line is the first line of a cash flow statement when a company employs the Indirect Method in the operating cash flow section.ĭepreciation – Supplemental Depreciation – Supplemental represents total non-cash depreciation expenses. When asset appears at cost, there is another account which must be prepared, known as Accumulated depreciation account that appears in the Balance sheet. (2) When asset account is to be prepared at Cost. If asset appears in the Balance sheet at book value following entries appear in the asset account prepared for this purpose:ĭr. Preparation of Fixed Asset Account: (1) When asset account is to be prepared at book value. (2) Considered while preparing concerned asset account for calculating cash from/used in investing activities. (1) Added while calculating Cash from Operating activities. Adjustments in case of Cash Flow statement are also treated at two places like in case of Final accounts done in class 11 th.
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