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22 November, 00:01

Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities?

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  1. 22 November, 01:25
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    Operating Activities means those activities which form the regular nature of business, or are the normal transactions of such business.

    Sale of fixed asset, is not a regular transaction, acquisition or sale of fixed asset is part of investing activities.

    Therefore, the gain or loss arising from such sale is also part of investing activity, and therefore while computing cash flow from operating activities, gain or loss from sale of assets is not considered and reversed from net income.
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