When preparing the statement of cash flows by the indirect method,if current liabilities decrease,the difference is:
A)added to net income.
B)added to investments.
C)deducted from net income.
D)subtracted from investments.

Question

Quizplus · Accepted Answer

When preparing the statement of cash flows by the indirect method, a decrease in current liabilities is deducted from net income. This is because a decrease in current liabilities means that less cash was used to pay off those liabilities, resulting in more cash being available for other activities. Therefore, the decrease needs to be subtracted from net income to accurately reflect the cash flow for the period.

When Preparing the Statement of Cash Flows by the Indirect