Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?
A) Add an increase in Accounts Payable
B) Add Depreciation Expense
C) Add an increase in Accounts Receivable
D) None of the above

Question

Quizplus · Accepted Answer

When using the indirect method to compute cash from operations, an increase in Accounts Receivable is subtracted from net income, not added. This is because an increase in Accounts Receivable represents sales that have not yet been collected in cash, thus not affecting the cash flow.

Which of the Following Adjustments Would Be in Error If