When computing the net cash provided by operating activities using the indirect method on the statement of cash flows, which item below would NOT be added to net income?
A) Depreciation.
B) Loss on the sale of an asset.
C) Decrease in accounts payable.
D) Decrease in prepaid expenses.

Question

Quizplus · Accepted Answer

When using the indirect method to compute net cash provided by operating activities, decreases in current liabilities such as accounts payable are actually subtracted from net income instead of being added. Depreciation is added back to net income to account for non-cash expenses, and losses on the sale of assets are added back to adjust for any one-time losses. Decreases in prepaid expenses would also be added back.

When Computing the Net Cash Provided by Operating Activities Using