An increase in accounts receivable of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:
A) an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
B) a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
C) an addition of $1,000 under financing activities.
D) a deduction of $1,000 under financing activities.

Question

Quizplus · Accepted Answer

Under the indirect method, an increase in accounts receivable is considered a deduction from net income to arrive at net cash provided by operating activities. This is because the company has not yet received cash for the sale, resulting in a decrease in cash from operating activities.

An Increase in Accounts Receivable of $1,000 Over the Course