A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
*Relates solely to the acquisition of inventory
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What will appear in the operating activities section related to salary payable?

Question

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to salary payable?

Quizplus · Accepted Answer

Increases in salary payable (a liability) indicate that the company has incurred expenses that have not yet been paid in cash. Therefore, the increase is added back to net income in the operating activities section of the cash flow statement to adjust for the fact that these expenses reduced net income but did not involve an outflow of cash during the period.

A Company Uses the Indirect Method to Prepare the Statement