![]() On Propensity’s statement of cash flows, this amount is shown in the Cash Flows from Operating Activities section as an adjustment to reconcile net income to net cash flow from operating activities. The sole noncash expense on Propensity Company’s income statement, which must be added back, is the depreciation expense of $14,400. To reconcile net income to cash flow from operating activities, these noncash items must be added back, because no cash was expended relating to that expense. Net income includes deductions for noncash expenses. On Propensity’s statement of cash flows, this amount is shown in the Cash Flows from Operating Activities section as Net Income. ![]() The net income on the Propensity Company income statement for December 31, 2018, is $4,340. The operating activities cash flow is based on the company’s net income, with adjustments for items that affect cash differently than they affect net income. ![]()
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