Gains from operating operations that raise net income but do not result in cash receipts must be deducted from net income when converting to a cash basis. Net income is decreased by a loss, but since actual cash is not distributed, this must be put back to net income.
What is net income?
Sales are subtracted from cost of products sold, selling, general and administrative expenditures, operating expenses, depreciation, interest, taxes, and other expenses to arrive at net income (NI), also known as net earnings. Investors can use this figure to determine how much a company's revenue exceeds its costs. This figure is a measure of a company's profitability and may be found on the income statement. A person's income after taxes and deductions is referred to as their net income.
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