When preparing a statement of cash flows under the indirect method, an increase in ending accounts receivable over beginning accounts receivable will result in an adjustment to net income in the operating activities section because
A)cash was increased since accounts receivable is a current asset
B)the accounts receivable increase was a revenue included in net income, but it was not a source of cash
C)the net increase in accounts receivable decreases net sales and represents an assumed use of cash
D)all changes in noncash accounts must be disclosed on the cash flow statement

Question

Quizplus · Accepted Answer

An increase in ending accounts receivable over beginning accounts receivable indicates that revenue was recognized but cash was not received. Hence, it is a noncash transaction that needs to be adjusted in the operating activities section of the statement of cash flows.

When Preparing a Statement of Cash Flows Under the Indirect