If a company is using the indirect method to prepare the statement of cash flows,identify where an increase in the accounts receivable account should be reported:
A)An increase in cash flows from operating activities
B)An increase in cash flows from investing activities
C)A decrease in cash flows from operating activities
D)A decrease in cash flows from investing activities
E)An increase in cash flows from financing activities

Question

Quizplus · Accepted Answer

An increase in the accounts receivable account represents an increase in the amount of money owed to the company by customers for goods or services sold on credit. This increase is not a result of investing or financing activities, but rather an operating activity. Therefore, the increase should be reported as a decrease in cash flows from operating activities.

If a Company Is Using the Indirect Method to Prepare