The Accounts Payable balance has increased during the year. How would this event affect the statement of cash flows operations section-indirect method?
A) It is already included in the net income.
B) It would affect the operations section positively.
C) It would affect the operations section negatively.
D) Does not affect the cash flow from operations.

Question

Quizplus · Accepted Answer

An increase in Accounts Payable means that the company has more unpaid bills at the end of the period than at the beginning. In the indirect method of cash flow statement preparation, increases in current liabilities (like Accounts Payable) are added back to net income in the operating activities section. This is because the company is holding onto cash longer, which positively affects cash flow from operations.

The Accounts Payable Balance Has Increased During the Year