When using the indirect method to prepare the statement of cash flows, a decrease in current liabilities is:
A)subtracted from current assets in the cash flows from financing activities section.
B)subtracted from net income in the cash flows from operating activities section.
C)added to net income in the cash flows from operating activities section.
D)added to inventory purchases in the cash flows from investing activities section.

Question

Quizplus · Accepted Answer

Because a decrease in current liabilities is caused by cash outflow exceeding expenses, it is subtracted from net income to arrive at cash flows from operating activities.

When Using the Indirect Method to Prepare the Statement of Cash