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+--- Thread: cash flow from operating activities (/showthread.php?tid=6366)
cash flow from operating activities - zia ahmad - 08-12-2009
AOA.plz give me guidence relating to non cash items in operating activites under indirect method. that "is the gain/loss on sale of
fixed assets or investment is treated as non-cash item"?? if yes what is logic behind it?? i shall be very glad
regards
- wsafca - 08-13-2009
Gain / loss on the sale of asset is a non cash item.
I Just give an example to explain.
Asset Cost = Rs. 100,000
Acc. Dep = Rs. 60,000
Sold for = Rs. 50,000
Now what is Profit here? yes Rs. 10,000
Now What is received in cash ? Yes Rs. 50,000
Cash inflow is Rs. 50,000 but not Rs. 10,000 in other words, cash inflow is the sale proceed but not the profit.Therefore we treat it as non-cash item.
Regards
Waqas
- zia ahmad - 08-14-2009
thanks brother for guidance. now i got the point