The document discusses the AFN equation and clarifies that notes payables are excluded from calculations of spontaneous increases in accounts payables and accruals. This is because notes payable represent external capital sources, while spontaneous funds arise from normal business operations. Therefore, it is true that notes payable should not be included in this context.

1. When considering the AFN equation, we exclude notes payables from our calculation of
Spontaneous increases in Accounts Payables and Accruals because Notes Payable is a source of
external capital. True or false?
Solution
True, spontaneous funds are funds arising out of normal operations from suppliers, employees, &
government, including immediate increase in accounts payable and accruals. But they dont
include notes payable because it is a source of external capital and not internally generated
through normal business operations.