Under the direct method, cash from customers would be sales plus a(n):
A) Decrease in accounts payable.
B) Increase in accounts payable.
C) Decrease in accounts receivable.
D) Increase in accounts receivable.

Question

Quizplus · Accepted Answer

Under the direct method of preparing the cash flow statement, cash from customers is calculated by adjusting sales for changes in accounts receivable. Specifically, if accounts receivable decrease, it means that more cash has been collected from customers, thus cash from customers would be sales plus a decrease in accounts receivable.

Under the Direct Method, Cash from Customers Would Be Sales