A statement of cash flows prepared under the INDIRECT method adds and subtracts certain items to the base number. Decreases in unearned revenues would be shown as
A) a deduction from net income.
B) an addition to net income.
C) a deduction from sales.
D) an addition to sales.

Question

Quizplus · Accepted Answer

A decrease in unearned revenues indicates that revenue has been recognized, which would have previously been included in net income. Therefore, it is deducted from net income in the cash flow statement under the indirect method to adjust for non-cash revenue.

A Statement of Cash Flows Prepared Under the INDIRECT Method