On a statement of cash flows prepared using the indirect method, an increase in prepaid expenses will be shown as something that increases operating cash flows.

Question

Quizplus · Accepted Answer

An increase in prepaid expenses means that the company has paid for expenses in advance, which reduces its cash balance. However, on a statement of cash flows prepared using the indirect method, this reduction in cash is added back to operating cash flows, as it is considered a non-cash expense.

On a Statement of Cash Flows Prepared Using the Indirect