An increase in accounts payable represents an increase in net cash provided by operating activities just like borrowing money from a bank. An increase in accounts payable has an effect similar to taking out a new bank loan. However, these two items show up in different sections of the statement of cash flows.

Question

Quizplus · Accepted Answer

An increase in accounts payable represents an increase in liabilities, which increases net cash provided by operating activities. This is similar to borrowing money from a bank, which also increases liabilities and net cash provided by operating activities. However, accounts payable would show up in the "changes in working capital" section of the statement of cash flows, while borrowing money from a bank would show up in the "financing activities" section.

An Increase in Accounts Payable Represents an Increase in Net