{"id":636,"date":"2018-04-19T20:21:41","date_gmt":"2018-04-19T20:21:41","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=636"},"modified":"2024-04-29T17:35:39","modified_gmt":"2024-04-29T17:35:39","slug":"non-cash-activities","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/non-cash-activities\/","title":{"raw":"Non-Cash Activities","rendered":"Non-Cash Activities"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Explain the nature of non-cash activities<\/li>\r\n<\/ul>\r\n<\/div>\r\nWhat business activities are considered non-cash activities? In order to prepare a cash flow statement, we need to understand which items on our income statement and balance sheet may not involve the transfer of cash, thus will not have a place on our statement of cash flows.\r\n\r\nThese non-cash activities may include depreciation and amortization, as well as obsolescence. \u00a0Property, plant and equipment resides on the balance sheet. These items are taken on the income statement in small increments called depreciation or amortization.\r\n\r\nIf we purchase a new dump truck, we don\u2019t take the entire purchase price as an expense when we purchase it. We put it as an asset on our balance sheet, and then take depreciation expense over the life of the dump truck.\r\n\r\nThese non-cash items need to be properly recorded on the income statement, but disregarded for the cash flow statement.\r\n<div class=\"textbox key-takeaways\">\r\n<h3>Learn More<\/h3>\r\nVisit Accounting for Management's website for some additional information about <a href=\"https:\/\/www.accountingformanagement.org\/non-cash-investing-and-financing-activities\/\" target=\"_blank\" rel=\"noopener\">non-cash investing and financing activities<\/a> to keep in mind as we work through the cash flow statement process.\r\n\r\n<\/div>\r\nCash and cash equivalents are those items on the balance sheet that are liquid assets. Cash can be spent, so it is the most liquid of the assets.\r\n\r\nCash equivalents might include money market accounts, treasury bills or commercial paper. It is essentially \u00a0a place to sit money, to make a return on it. Cash sitting in a checking account may get no interest, but a money market account will earn interest while it sits. In this way, a company can put its idle cash to work.\r\n\r\nThese cash equivalents are pretty easy to move to a checking account if the cash becomes needed, but getting interest rather than just letting it sit there is a smart step!\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/6cdc6157-9c59-45d1-a75b-2c912bcdf8e8\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Explain the nature of non-cash activities<\/li>\n<\/ul>\n<\/div>\n<p>What business activities are considered non-cash activities? In order to prepare a cash flow statement, we need to understand which items on our income statement and balance sheet may not involve the transfer of cash, thus will not have a place on our statement of cash flows.<\/p>\n<p>These non-cash activities may include depreciation and amortization, as well as obsolescence. \u00a0Property, plant and equipment resides on the balance sheet. These items are taken on the income statement in small increments called depreciation or amortization.<\/p>\n<p>If we purchase a new dump truck, we don\u2019t take the entire purchase price as an expense when we purchase it. We put it as an asset on our balance sheet, and then take depreciation expense over the life of the dump truck.<\/p>\n<p>These non-cash items need to be properly recorded on the income statement, but disregarded for the cash flow statement.<\/p>\n<div class=\"textbox key-takeaways\">\n<h3>Learn More<\/h3>\n<p>Visit Accounting for Management&#8217;s website for some additional information about <a href=\"https:\/\/www.accountingformanagement.org\/non-cash-investing-and-financing-activities\/\" target=\"_blank\" rel=\"noopener\">non-cash investing and financing activities<\/a> to keep in mind as we work through the cash flow statement process.<\/p>\n<\/div>\n<p>Cash and cash equivalents are those items on the balance sheet that are liquid assets. Cash can be spent, so it is the most liquid of the assets.<\/p>\n<p>Cash equivalents might include money market accounts, treasury bills or commercial paper. It is essentially \u00a0a place to sit money, to make a return on it. Cash sitting in a checking account may get no interest, but a money market account will earn interest while it sits. In this way, a company can put its idle cash to work.<\/p>\n<p>These cash equivalents are pretty easy to move to a checking account if the cash becomes needed, but getting interest rather than just letting it sit there is a smart step!<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_6cdc6157-9c59-45d1-a75b-2c912bcdf8e8\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/6cdc6157-9c59-45d1-a75b-2c912bcdf8e8?iframe_resize_id=assessment_practice_id_6cdc6157-9c59-45d1-a75b-2c912bcdf8e8\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-636\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Non-Cash Activities. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":3,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Non-Cash Activities\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"be938171-ebc9-47a7-9bb9-5e222a8d47bb, 6669061b-0b24-4905-8570-a4e7536437f3","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-636","chapter","type-chapter","status-publish","hentry"],"part":112,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/636","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":13,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/636\/revisions"}],"predecessor-version":[{"id":4160,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/636\/revisions\/4160"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/112"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/636\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=636"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=636"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=636"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=636"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}