In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)?

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22-08-2022
Business

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In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)?

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smecloudbird18 smecloudbird18 · Answer 1 · 2022-08-27T10:27:01+02:00

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as an addition to the net income.

It is because the loss on the sale of equipment was debited to the income statement, due to which the net profit reduces. When the operating cash flow is determined under the indirect method, the same will be added to the net income.

Cash flow statement is prepared to determine the balance of cash at the end of any fiscal period after taking into account the cash flows which are generated from the various activities of the business.

These activities include operating and investing as well as the financing activities. The operating activities are considered as the primary activities of the company.

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