On an indirect method statement of cash flows, an increase in accounts payable would be:
A) added to net income
B) reflected in the investing activities section
C) deducted from net income
D) netted against any decreases in accounts receivable

Question

Quizplus · Accepted Answer

An increase in accounts payable indicates that a company has incurred expenses for which it has not yet paid cash. In the indirect method of preparing the statement of cash flows, this increase is added back to net income in the operating activities section because it represents a source of cash (i.e., expenses incurred without a corresponding cash outflow).

On an Indirect Method Statement of Cash Flows, an Increase