On the statement of cash flows prepared using the direct method, cash from customers would be computed as sales plus
A) an increase in accounts receivable.
B) an increase in accounts payable.
C) a decrease in accounts receivable.
D) a decrease in accounts payable.

Question

Quizplus · Accepted Answer

When using the direct method to prepare a statement of cash flows, cash received from customers is computed as sales plus or minus adjustments for changes in accounts receivable. Specifically, if accounts receivable decrease during the period, it means that more cash has been collected from customers than sales made on credit. Therefore, a decrease in accounts receivable is added to sales to determine the cash received from customers.

On the Statement of Cash Flows Prepared Using the Direct