The Viviana Co.uses the indirect method to determine its cash flow from operations.Which of the following items will be subtracted from net income to find its cash flow from operations?
A)Decrease in Supplies.
B)Increase in Accounts Payable.
C)Depreciation Expense.
D)Increase in Accounts Receivable.

Question

Quizplus · Accepted Answer

Under the indirect method,decreases in current assets and increases in current liabilities are added to net income while increases in current assets and decreases in current liabilities are subtracted from net income.Accounts Receivable is a current asset.Depreciation expense is added back to net income because it reduces net income,but it does not reduce cash flow.