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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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In computing the period’s net operating cash flows, why are noncash expenses added back to net income?

To determine

Explain the reason for the noncash expenses are added back to net income while calculating the operating cash flows of an accounting period.

Explanation

Operational Cash Flow:

The cash flow obtained from the operational and profit generating activities in a firm are termed as the operational cash flow. The operating cash flows increase or decrease the current assets and current liabilities of a firm.

While calculating the operating cash flows in an accounting period, the noncash expenses are added back to the net income. The income statement in any company is prepared on an accrual basis...

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