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

Question

Quizplus · Accepted Answer

When using the indirect method in the statement of cash flows, an increase in a current liability account (such as accounts payable) would be added to net income to adjust it because the increase indicates that the company held onto cash longer or did not spend cash that would have otherwise reduced its cash balance.

When Using the Indirect Method in the Statement of Cash