Which method of preparing the statement of cash flows would show increases in accounts receivable being subtracted from net income?
A)the direct method
B)the indirect method
C)accrual basis method
D)No method shows increases in accounts receivable being subtracted from net income.

Question

Quizplus · Accepted Answer

The indirect method of preparing the statement of cash flows adjusts net income for changes in balance sheet accounts to convert the net income from an accrual basis to a cash basis. An increase in accounts receivable indicates that not all of the revenues included in net income were collected in cash, so this increase is subtracted to arrive at the cash provided by operating activities.

Which Method of Preparing the Statement of Cash Flows Would