To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by estimating the percentage of income statement transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions. re-recording all income statement transactions that directly affect cash in a separate cash flow journal. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash. eliminating all transactions that have no current or future effect on cash, such as depreciation, from the net income computation.
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