When using the indirect method, adding a decrease in prepaid insurance to net income eliminates the effect of recording insurance expense that ______.

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30-11-2022
Business

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When using the indirect method, adding a decrease in prepaid insurance to net income eliminates the effect of recording insurance expense that ______.

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tutorconsortium205 tutorconsortium205 · Answer 1 · 2022-12-03T10:21:11+01:00

When using indirect method, adding decrease in prepaid insurance to net income eliminates effect of recording insurance expense that has not been paid in cash.

What is net income?

In the world of finance and business, net income (also referred to as total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) refers to an entity's income less costs of goods sold, expenses, depreciation and amortization, interest payments, and taxes for a specific accounting period. It is calculated as the total of the period's revenues, profits, and losses less the sum of the expenses, gains, and losses. It has also been referred to as the net increase in equity held by shareholders as a result of business operations. It differs from gross income because gross income only deducts the cost of the goods sold from revenue. Net income for families and individuals is their (gross) income less any applicable taxes and other deductions.

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