Question

Required information The following information applies to the questions displayed below! The beginning account balances for Terry's Auto Shop as of January 1, Year 2. follow Account Titles Beginning Balances Cash $6, 110 Inventory 3,190 Common Stark 7,220 Hetained Earnings 1,90 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4.200 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $245 cash 3. Returned $455 of damaged merchandise for credit on account 4. Agreed to keep other damaged merchandise for which the company received a $270 allowance 5. Sold merchandise that cost $2 660 for 54.810 cash 6. Delivered merchandise to customers in Event 5 under terms FOR destination with freight costs amounting to $150 cash. 7. Paid $2.820 on the merchandise purchased in Event 1

Answer 1

The difference between net income and net cashflow from operating activities exixts because operating expenses are not required to be accounted for when determining net income

Net income is the profit a company has earned for a period, while cash flow from operating activities measures the cash movement of a comapny's day to day operations.

Net income is the first to takenn into consideration while calculating Cash flow from operating activities. Net income is carried over from the income statement. Net cash flow from operating activities is calculated as the sum of net income.

Operating income is revenue less any operating expenses, while net income is operating income less any other non-operating expenses, such as interest and taxes.