In the indirect method, an increase in trade receivables is reported on the statement of cash flows as:
A) an increase to sales.
B) a decrease to sales.
C) an increase to cash.
D) a decrease to cash.

Question

Quizplus · Accepted Answer

An increase in trade receivables means that customers have purchased goods on credit and have not yet paid for them, which results in a decrease in cash. Therefore, an increase in trade receivables is reported on the statement of cash flows as a decrease to cash.

In the Indirect Method, an Increase in Trade Receivables Is