To determine cash payments for operating expenses for the statement of cash flows using the direct method, a decrease in accrued expenses is added to operating expenses other than depreciation.

Question

Quizplus · Accepted Answer

Accrued expenses represent expenses that have been incurred but not yet paid. An increase in accrued expenses is added to operating expenses other than depreciation to determine cash payments for operating expenses using the direct method, whereas a decrease in accrued expenses is subtracted. Therefore, adding a decrease in accrued expenses to operating expenses would be the correct approach to determine cash payments for operating expenses.

To Determine Cash Payments for Operating Expenses for the Statement