Bayt.com

Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

To calculate cash flows using the indirect method m which one must be add back to net income ? revenue Depreciation Exp markeking exp and why ?

Accounting Cash Flow Cash Flow Forecasting
user-image
Question added by ramy desouki , Accountant , Berlitz Egypt- Westwood Group
Date Posted: 2017/01/28
Upvote (1) Views (23) Followers (5) Answers (5) Report Question
Write an Answer
Register now or log in to answer.
Soliman Abd ALmalak Gendy
by Soliman Abd ALmalak Gendy , مدير ادارة مراقبة حسابات , الجهاز المركزى للمحاسبات

Expenses with no cash outflows are added back to net income, because revenue depreciation Ex is an item that has no effect on cash flows in the period

Deleted user
by Deleted user

Depriciation is just an allocation process with no cash outflow.Any non cash item deducted from revenue to arive at net income must be added back in net income to calculate net cashflows such as depriciation.

Marketing expence may also include some non cash portion if we do not pay it before year end.in this case only non cash portion will be added back in net income

Faraz Sultan
by Faraz Sultan , head of regional operations , BMSA GLOBAL

Such expenses which do not carry a cash effect but are charged for the purpose of reporting in P&L are added back into the Cash Flow statement as there are no cash outflows against them. Since Marketing and other expenses usually are settled through an outflow of cash / Bank, they cannot be added back to the cashflow

Muhammad Kassab CPA CMA CertIFR
by Muhammad Kassab CPA CMA CertIFR , Accounting Manager , Marine Buildings Landmarks

Thanks for the mention, You adjust the net income to remove the effect of none-cash expenses as they affect net income without any real cash in or outflows. That's why depreciation expense is added back. While you don't add back marketing expenses ase they incur cash outflows.

MUHAMMED MALIK
by MUHAMMED MALIK , Senior Financial Accountant , Araqah Investment Group.

Depreciation is considered a non-cash expense, since it is simply an ongoing charge to the carrying amount of a fixed asset, designed to gradually reduce the recorded cost of the asset over its useful life. It has no impact on cash flows.

If marketing expenses are settled by cash or bank same fiscal year, it cannot be added bank.  

Write Your Answer
More Questions Like This