When the indirect method is used,if accounts payable increases during the accounting period,the change in accounts payable is:
A)added to the change in the cash account.
B)added to net income.
C)subtracted from net income.
D)subtracted from the change in the cash account.

Question

Quizplus · Accepted Answer

Accounts Payable increases when purchases are made on account and it decreases when cash is paid on account.An overall increase in this account,then,implies that cash paid on account was less than purchases on account.To convert from the higher credit purchases number to the lower amount of cash paid to creditors,we add the increase in Accounts Payable to net income to calculate cash flows from operating activities.

When the Indirect Method Is Used,if Accounts Payable Increases During