UK Accounting theory question

[Barca]

If you buy equipment for a business on a notes payable, should the notes payable amount be added onto the Net Income in the cashflow statement?

 

[Fidget]

Income is money generated by means of your job or a business operation... a payable note is basically a loan... and is therefore not income.

 

[Drmdcpa]

Yes and no.

When preparing cash flow from operations using the indirect method any short term part of the note affects working capital; thus it impacts the cash flows from operations.

The long term aspect of the note goes in the financing section of the statement of cash flows.

 

[Fidget]

Is that a U.S GAAP thing? I wouldn't count a loan - in any shape or form, as "income".

 

[Drmdcpa]

The Statement of Cash Flows has a section called Cash from/for Operations. There are two ways to calculate this section.

The indirect method starts with net income from the income statement and adjusts for non-cash transactions. Changes in working capital are part of those adjustments.

I never referred to a loan as income. Not sure where you are getting that out of what I wrote.