I know you add a loss on the sale of equipment for the indirect method when calculating CFO What do you do for a gain in the sale of equipment? Do you use gain and losses when calculating CFO with the direct method?
Shouldn’t this be in CFI? Equipment sale is not operating activities so it’s CFI not CFO. In the direct method you add this straight to CFI. On the indirect method you need to back this out because it’s has been factored into the Net Income, thus need to back out this effect to calculate the CFO.
Gain on the sale of equipment is deducted from NI to arrive at CFO. The actual sale price is an inflow in CFI. With the direct method, you don’t use gain/loss because they are not cash-related.
Thanks… I see it now. So I guess I would add a loss and subtract a gain for the indirect method to back it out of NI. I guess you don’t touch it for the direct then.
What is CFO and CFI? CF Outflow and Inflow?
Atomic_Sheep I guess it is Chief Financial Officer and Chief Financial Intendant.