On a statement of cash flows prepared using the indirect method, an increase in Accounts Receivable during the period is:
A)added to net income to determine net cash provided by investing activities.
B)deducted from net income to determine net cash provided by investing activities.
C)deducted from net income to determine net cash provided by operating activities.
D)added to net income to determine net cash provided by operating activities.

Question

Quizplus · Accepted Answer

An increase in Accounts Receivable during the period indicates that the company has not received cash for sales made during the period. This change is related to the company's operating activities, so it should be reported as an adjustment to net income in the operating section of the statement of cash flows. Therefore, it should be deducted from net income to determine net cash provided by operating activities.

On a Statement of Cash Flows Prepared Using the Indirect