When preparing the operating activities section of the statement of cash flows using the indirect method,decreases in current liabilities are deducted from net income.

Question

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Decreases in current liabilities decrease the amount of cash required to pay off those liabilities, resulting in an increase in cash flows from operating activities. Therefore, they are deducted from net income when preparing the operating activities section of the statement of cash flows using the indirect method.

When Preparing the Operating Activities Section of the Statement of Cash