Cat Nap Corp.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet:

How will the change in Accounts Receivable be shown on the statement of cash flows?
A)addition to net income under the operating activities section
B)subtraction from net income under the operating activities section
C)positive cash flow under the financing activities section
D)negative cash flow under the investing activities section

Question

Cat Nap Corp.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet:

How will the change in Accounts Receivable be shown on the statement of cash flows?
A)addition to net income under the operating activities section 
B)subtraction from net income under the operating activities section 
C)positive cash flow under the financing activities section 
D)negative cash flow under the investing activities section

Quizplus · Accepted Answer

The change in Accounts Receivable will be shown as a subtraction from net income under the operating activities section using the indirect method. This is because an increase in accounts receivable represents a decrease in cash flow from operating activities, as it indicates that customers have not yet paid for goods or services that have already been provided.