In determining net cash flow from operating activities, a decrease in accounts payable during a period ________.
A) does not require an adjustment under the indirect method
B) does not require an adjustment under the direct method
C) requires a subtraction adjustment to net income under the indirect method
D) requires a subtraction adjustment to payments for merchandise under the direct method

Question

Quizplus · Accepted Answer

A decrease in accounts payable indicates that cash was used to pay off liabilities, which reduces cash flow. Under the indirect method, this requires subtracting the decrease from net income to adjust for the cash outflow.

In Determining Net Cash Flow from Operating Activities, a Decrease