When considering the AFN equation we exclude notes payables

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.