A use of cash can be determined by:
A) a decrease in a liability.
B) an increase in an asset.
C) an increase in retained earnings.
D) Both an increase in an asset and an increase in retained earnings.
E) Both a decrease in a liability and an increase in an asset.

Question

Quizplus · Accepted Answer

A use of cash can occur when there is a decrease in a liability, such as paying off a loan or accounts payable, and an increase in an asset, such as purchasing inventory or equipment. Therefore, the best choice is E, which includes both a decrease in a liability and an increase in an asset as possible uses of cash. Options A, B, C, and D only describe one type of use of cash.

A Use of Cash Can Be Determined By