When preparing the statement of cash flows by the indirect method, if current assets have increased, the difference is:
A) added to net income.
B) added to investments.
C) deducted from net income.
D) subtracted from investments.

Question

Quizplus · Accepted Answer

When preparing the statement of cash flows by the indirect method, an increase in current assets indicates that cash has been used to purchase those assets, thus reducing the cash available from operations. Therefore, the increase in current assets is deducted from net income to adjust for the cash that was not actually available for other uses.

When Preparing the Statement of Cash Flows by the Indirect