When preparing the Statement of Cash Flows by the indirect method, if current liabilities increase, the difference is:

Question

Quizplus · Accepted Answer

When preparing the Statement of Cash Flows by the indirect method, an increase in current liabilities indicates that cash flows from operations are higher than net income would suggest, because the company did not have to use cash to settle all its obligations. Therefore, the increase in current liabilities is added to net income to adjust it in the operating activities section.

When Preparing the Statement of Cash Flows by the Indirect