Aacountancy
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 November 2012
why is decrease in stock added back to the net income in a cash flow statement ?
Please kindly revert as soon as possible.
Thanks.
Please kindly revert as soon as possible.
Thanks.
07 November 2012
As per indirect method you have to start from the profit as per profit and loss account.
Now suppose the opening stock is 1 lakh and closing stock is 50,000.
Then we can see that stock of additional 50,000 has been sold as against previous year and as the stock is sold extra cash has been received in business as compared to last year.
Now suppose the opening stock is 1 lakh and closing stock is 50,000.
Then we can see that stock of additional 50,000 has been sold as against previous year and as the stock is sold extra cash has been received in business as compared to last year.
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