In a statement of cash flows prepared by the indirect method, an increase in accounts receivable should be
A)deducted from net income in the operating activities section
B)added to net income in the operating activities section
C)reported as an inflow in the investing activities section
D)reported as an inflow in the financing activities section

Question

Quizplus · Accepted Answer

An increase in accounts receivable means that less cash was collected from customers than was recorded as sales revenue. Therefore, the increase in accounts receivable should be deducted from net income in the operating activities section, as it represents a non-cash expense (accounts receivable is an asset account and an increase in an asset account is subtracted from net income).

In a Statement of Cash Flows Prepared by the Indirect