In arriving at cash from operating activities,adding a decrease in Supplies to net income eliminates the effect of recording expenses that:
A)increased net income,but has not been paid in cash this period.
B)decreased net income,but has not been paid in cash this period.
C)decreased net income and decreased cash.
D)flow this period increased net income and increased cash flow this period.

Question

Quizplus · Accepted Answer

Adding decreases in current assets eliminates the effects of some transactions that decreased net income but did not affect cash in the current period.For example,when Supplies are used,net income decreases but cash is not affected.To eliminate these noncash effects from our cash flow computations,we must add back decreases in Supplies and other current assets.

In Arriving at Cash from Operating Activities,adding a Decrease in Supplies