Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?
A)An increase in accounts receivable will be subtracted from net income.
B)A loss on the sale of a depreciable asset will be added to net income.
C)An increase in accrued liabilities will be subtracted from net income.
D)An increase in accounts payable will be added to net income.

Question

Quizplus · Accepted Answer

An increase in accrued liabilities indicates that expenses have been incurred but not yet paid in cash, which actually increases cash flow. Therefore, it should be added to net income, not subtracted, when adjusting net income to arrive at cash flows from operating activities using the indirect method.

Which of the Following Statements Does Not Correctly Describe an Adjustment