Assume a company uses the direct method to prepare its statement of cash flows. If the company's accounts receivable increase during the accounting period, the change in accounts receivable
Is:
A) added to the change in the cash account to calculate cash collected from customers.
B) subtracted from sales revenue to calculate the cash collected from customers.
C) added to sales revenue to calculate the cash collected from customers.
D) subtracted from the change in the cash account to calculate cash collected from customers.

Question

Quizplus · Accepted Answer

An increase in accounts receivable indicates that not all sales were collected in cash, so it is subtracted from sales revenue to determine the actual cash collected from customers.

Assume a Company Uses the Direct Method to Prepare Its