When using the indirect method in the statement of cash flows, the company would add the net change in a current liability account if the balance increased over time.

Question

Quizplus · Accepted Answer

This is true. The indirect method starts with net income and adjusts for non-cash items and changes in current asset and liability accounts to arrive at cash flow from operating activities. An increase in a current liability account would reflect an outflow of cash, so it would need to be added back to net income in the operating activities section.

When Using the Indirect Method in the Statement of Cash