In arriving at cash from operating activities,subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:
A)increased cash,but did not affect net income.
B)increased cash and increased net income.
C)decreased cash,but did not affect net income.
D)decreased cash and decreased net income.

Question

Quizplus · Accepted Answer

Subtracting decreases in current liabilities allows us to include the cash effects of other transactions that did not affect net income in the current period but did decrease cash.For example,Cash decreases when a company pays wages that were incurred and expensed in a previous period.These cash outflows are captured by subtracting decreases in current liabilities.

In Arriving at Cash from Operating Activities,subtracting a Decrease in Salaries