Avatar Company uses the indirect method to prepare the cash flow statement.Please refer to the following section of the comparative balance sheet:
$\begin{array}{|l|r|r|r|}
\hline&{2017} &{2016} &{\text { Increase/decrease }} \
\hline \text { Accounts payable } & \$ 4000 & \$ 6000 & \$(2000) \
\hline \text { Accrued liabilities } & 2000 & 1000 & 1000 \
\hline \text { Long-term bills payable } & 84000 & 90000 & (6000) \
\hline \text { Total liabilities } & \$ 90000 & \$ 97000 & \$(7000)\\hline
\end{array}$ The change in accrued liabilities will be shown as a positive cash flow in the adjustments to Profit.

Question

Avatar Company uses the indirect method to prepare the cash flow statement.Please refer to the following section of the comparative balance sheet:
 $\begin{array}{|l|r|r|r|} 
\hline&{2017} &{2016} &{\text { Increase/decrease }} \
\hline \text { Accounts payable } & \$ 4000 & \$ 6000 & \$(2000) \
\hline \text { Accrued liabilities } & 2000 & 1000 & 1000 \
\hline \text { Long-term bills payable } & 84000 & 90000 & (6000) \
\hline \text { Total liabilities } & \$ 90000 & \$ 97000 & \$(7000)\\hline
\end{array}$ The change in accrued liabilities will be shown as a positive cash flow in the adjustments to Profit.

Quizplus · Accepted Answer

The increase in accrued liabilities indicates that expenses have been recognized but not yet paid, which means cash has been conserved, resulting in a positive adjustment to cash flow from operating activities.

Avatar Company Uses the Indirect Method to Prepare the Cash