Assume a company uses the indirect method to prepare its statement of cash flows.If the supplies account increases and accounts payable decreases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?
A)Both are added to net income.
B)The change in accounts payable is added to net income;the change in supplies is subtracted.
C)Both are subtracted from net income.
D)The change in supplies is added to net income;the change in accounts payable is subtracted.

Question

Quizplus · Accepted Answer

An increase in supplies indicates a cash outflow, and a decrease in accounts payable indicates a cash outflow, so both are subtracted from net income in the operating activities section.

Assume a Company Uses the Indirect Method to Prepare Its