When a company uses the indirect method to present the statement of cash flows, an increase in a current liability must be subtracted from net income to reconcile to net cash provided by operating activities.

Question

Quizplus · Accepted Answer

When using the indirect method to present the statement of cash flows, an increase in a current liability is added to net income to reconcile to net cash provided by operating activities, as it represents cash that has been received but not yet earned, or expenses that have been incurred but not yet paid.

When a Company Uses the Indirect Method to Present the Statement