When using the indirect method to determine operating cash flows,how is an increase in accounts receivable during the year shown on the Statement of Cash Flows?
A)Operating activity
B)Investing activity
C)Financing activity
D)Noncash investing and financing activity
E)Not reported on the statement of cash flows

Question

Quizplus · Accepted Answer

An increase in accounts receivable during the year indicates that cash was not collected from customers for the revenue recognized during the current year. Therefore, it is a use of cash and is shown as a negative adjustment to net income in the operating activities section of the statement of cash flows.

When Using the Indirect Method to Determine Operating Cash Flows,how