When the direct method is used to determine the net cash flow from operating activities,if accounts receivable increase over the accounting period,the change in accounts receivable is:
A)added to the change in the cash account to calculate cash collected from customers.
B)subtracted from sales revenue to calculate the cash collected from customers.
C)added to sales revenue to calculate the cash collected from customers.
D)subtracted from the change in the cash account to calculate cash collected from customers.

Question

Quizplus · Accepted Answer

When using the direct method, an increase in accounts receivable indicates that not all sales revenue was collected in cash. Therefore, the increase in accounts receivable is subtracted from sales revenue to calculate the cash collected from customers.

When the Direct Method Is Used to Determine the Net