Why do we need to add negative into the cell to negate the values?
Wouldn’t it be better if we know whether the amount is negative/positive to determine positive/negative cash flow?
And in the end, why do we need to remove negative for the net income? I understand it’s for validation. But, Can you provide me with a better intuition of doing so?
FYI, I didn’t learn about accounting.
Thanks for your questions.
Here are the answers:
We negate because we want to see revenues as positive numbers and costs as negative. Revenues are a source of income and costs are an expense. So, it makes sense to have positive revenues and negative costs.
In the end, we want to make a check and verify whether the number we obtained minus Net income, which was reported in the data gives 0. This is why we negate. That’s simply a check.
Hope it makes sense.
Hi Ned, thanks for the reply. I understand for Q1. But for Q2, it’s not for the validation part, instead, the part I mentioned is net income part where you need to remove the negation(right before the final validation of the net income). Hope it makes clear for you.