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How does accrued liabilities and accounts payable (decrease, non-cash) affect cash flows?

Accrued liabilities is a current liability, and any increases or decreases would be a source and a use respectively, correct? My boss told me that this account wasn't reduced with cash, and that the issuance of Preferred Stock would offset this accrued liability. But if we are issuing Pref Stock in exchange for cash, then it is essentially a cash flow.

In addition, he mentioned that our accounts payable decreased (Use) from non-cash sources, so this would not belong on the cash flow statement? Do I include the accounts payable decrease under operating activities and then add the portion of it NOT paid off with cash as a non-cash expense at the top?


Jim Edge Cannon
Title: Accountant
Company: Company
(Accountant, Company) |

first of all, I don't understand clearly about your question.
Accrued Liabilities means you incurred expense right now but cash flow in the future.
For example (you have to paid salary for Jan but you actually paid cash outflow at Feb, in this scenario, your month end of Jan should be Dr.Salary Exp (+E,-SE) Cr.Accrued Expense-Salary(+L) liability, later when you paid cash at Feb,Dr.Accrued Exp-Salary(-L) Cr.Cash or Bank(-A). That the meaning of accrued liabilities.

Base on your question, it seems that your company incurred some accrued expense & repay with preferred stock instead of cash. So the transaction look like this Dr.Accrued Expense(-L) & Cr.Preferred stock(+SE).

From the statement of cash flow, cash from financing activities include the issuing more stock.

Mark Sutherland
Title: CFO
Company: Profit By Design CFO & Controller Servic..
(CFO, Profit By Design CFO & Controller Services) |

When you made the original credit entry to Accrued Liab, what was the debit entry?


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