Why is it necessary to convert accrual-based net income to cash-basis income
- Why is it necessary to convert accrual-based net income to cash-basis income when preparing a statement of cash flows?
- The president of Ferneti Company is puzzled. During the last year, the company experienced a net loss of $800,000, yet its cash increased $300,000 during the same period of time. Explain to the president how this could occur.
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The statement of cash flows tracks the flow of cash in and out of the business. The cash-basis income is exactly the flow of cash in and out of the business. Accrual- based income, on the other hand, includes several adjustments that just…
APA
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