Under the indirect method,the increase or decrease in current liabilities is handled in the operating section of a cash flow statement.

Question

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Under the indirect method of preparing a statement of cash flows, changes in current liabilities are included in the operating section. This is because current liabilities are related to the company's day-to-day operations and reflect cash flows related to the purchase of goods or services, payment of expenses, and other similar activities. As such, changes in current liabilities are treated as a component of net income to arrive at cash flow from operating activities.

Under the Indirect Method,the Increase or Decrease in Current Liabilities