When the indirect method is used to determine net cash provided by (used in)operating activities,subtracting an increase in Accounts Receivable from net income eliminates the effect of recording revenue that:
A)increased net income,but did not impact cash.
B)decreased net income,but did not impact cash.
C)increased net income and increased cash flow.
D)decreased net income and decreased cash flow.

Question

Quizplus · Accepted Answer

Subtracting increases in current assets eliminates the effects of transactions that increased net income but did not affect cash in the current period.For example,net income increases when a company provides services on account,but cash is not affected.

When the Indirect Method Is Used to Determine Net Cash