The Accounts Receivable balance has decreased during the year. How would this event affect the statement of cash flows operations section-indirect method?
A) It is already included in the net income.
B) It would affect the operations section positively.
C) It would affect the operations section negatively.
D) Does not affect the cash flow from operations.

Question

Quizplus · Accepted Answer

A decrease in Accounts Receivable indicates that cash has been collected on outstanding receivables, thus increasing the cash flow from operations. This is because, under the indirect method, decreases in current assets (other than cash) are added back to net income in the operating activities section of the cash flow statement.

The Accounts Receivable Balance Has Decreased During the Year