Using the indirect method, which of the following would be added to profit?
A)increase in accounts receivable
B)increase in prepaid expenses
C)depreciation expense
D)decrease in accounts payable

Question

Quizplus · Accepted Answer

According to the indirect method of calculating cash flow from operations, depreciation expense is added back to net income to arrive at the operating cash flows because it is a non-cash expense. Increases in accounts receivable and prepaid expenses are subtracted from net income as they represent decreases in cash flow. Similarly, a decrease in accounts payable is added back to net income as it represents an increase in cash flow.

Using the Indirect Method, Which of the Following Would Be