Using the Indirect Method
For the following question(s), indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the indirect method.
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When using the indirect method, where is an increase in accounts receivable during the year shown on the statement of cash flows?
A) Operating activity
B) Investing activity
C) Financing activity
D) Noncash investing and financing activity

Question

Using the Indirect Method 
For the following question(s), indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the indirect method.
-
When using the indirect method, where is an increase in accounts receivable during the year shown on the statement of cash flows?
A) Operating activity
B) Investing activity
C) Financing activity
D) Noncash investing and financing activity

Quizplus · Accepted Answer

An increase in accounts receivable is shown as an adjustment in the operating activities section under the indirect method, as it represents revenue that has been recognized but not yet collected in cash, thus reducing cash flow from operations.