When using the indirect method to complete the cash flows from operating activities section,what is the proper treatment for an increase in the accounts receivableAccounts Receivable balance?
A) Add the increase to net income
B) Add the increase to cash collections from customers
C) Deduct the increase from net income
D) Add the increase to cash payments to suppliers

Question

Quizplus · Accepted Answer

An increase in the Accounts Receivable account occurs because cash collections from customers are less than the amount of revenue recognized on account.Since the amount of cash collected is less than the amount of revenue recognized,the increase is deducted from net income to determine net cash flow from operating activities.

When Using the Indirect Method to Complete the Cash Flows