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

Question

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

Quizplus · Accepted Answer

The increase in accounts payable is related to purchases made during the period. Therefore, it should be subtracted from the total purchases to determine the actual cash paid to suppliers. This is in line with the direct method of preparing the statement of cash flows, which requires adjusting net income for non-cash items and using actual cash inflows and outflows for each operating activity.

A Company Uses the Direct Method to Prepare the Statement