Under the indirect method of preparing a statement of cash flows, a decrease in the balance in the Accounts Receivable account during the year is:
A) added in the operating activities section
B) subtracted in the financing activities section
C) subtracted in the operating activities section
D) added in the investing activities section

Question

Quizplus · Accepted Answer

A decrease in Accounts Receivable indicates that cash has been collected from customers, which increases cash flow from operating activities. Therefore, it is added back in the operating activities section under the indirect method.

Under the Indirect Method of Preparing a Statement of Cash