When the indirect method is used,if accounts receivable increases during the accounting period,the change in accounts receivable is:
A) added to the change in the cash account.
B) subtracted from net income.
C) added to net income.
D) subtracted from the change in the cash account.

Question

Quizplus · Accepted Answer

When accounts receivable increases, it means that sales have been made on credit and cash has not yet been received. Therefore, to adjust net income to reflect cash flow, the increase in accounts receivable is subtracted from net income in the indirect method.

When the Indirect Method Is Used,if Accounts Receivable Increases During