@Masarratsaleh Re: SCF – Here ‘s the best way to remember when to add or subtract using indirect method…
Subtract Assets
Add Liabilities and OE
It gets tricky when you have an increase or decrease so you have to think of this like an algebraic equation so you don't have to “think” about the logic…Just follow the basic rules.
Examples:
Increase in A/R – Rule: Subtract asset – Algebra: minus (+Asset) = subtract A/R increase
Decrease in unearned revenue – Rule Add Liabilities – Algebra: +(-Liability) = subtract unearned revenue decrease
Decrease in inventory – Rule: Subtract asset – Algebra: minus (-Asset) = add Inventory decrease
Increase in accounts payable – Rule: Add Liabilities – Algebra: +(+Liability) = add increase in accounts payable
Adjustments for expenses – Rule: All signs (+/-) reversed from above.
Example: Rule: Add Expenses because they decrease NI so Add expenses.
Non-cash expenses from income statement – Rule: Add to NI
Examples: depreciation, losses, amortization
Non-cash gains from income statement – Rule: Subtract from NI (just remember opposite of loss)
Example: gains
Hope that helps, CB
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