Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Accrued Liabilities-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:
A)Add to net income to arrive at net cash flows from operating activities.
B)Subtract from net income to arrive at net cash flows from operating activities.
C)Not used to adjust net income to calculate net cash flows from operating activities.

Question

Quizplus · Accepted Answer

A decrease in accrued liabilities means that some expenses that were previously recorded have now been paid, reducing the cash available. Therefore, to reconcile net income to net cash provided by operating activities, this decrease must be subtracted from net income.

Assume the Indirect Method Is Used to Compute Net Cash