When preparing the statement of cash flows by the indirect method,if current liabilities increase the difference is:
A)added to net income.
B)added to investments.
C)deducted from net income.
D)subtracted from investments.

Question

Quizplus · Accepted Answer

When preparing the statement of cash flows by the indirect method, an increase in current liabilities indicates that more cash is available (because liabilities represent amounts owed but not yet paid). Therefore, this increase is added to net income to adjust for the fact that not all of the reported net income resulted in an increase in cash.

When Preparing the Statement of Cash Flows by the Indirect