To prepare the statement of cash flows using the indirect method ________ net income.
A)a decrease in inventory is subtracted from
B)a purchase of a machine is subtracted from
C)cash paid for dividends is added to
D)a decrease in accounts payable is subtracted from

Question

Quizplus · Accepted Answer

In the indirect method of preparing the statement of cash flows, a decrease in accounts payable indicates that a company has paid off some of its liabilities, which means cash has been used. Therefore, it is subtracted from net income to adjust for the fact that this decrease does not affect net income but does reduce cash.

To Prepare the Statement of Cash Flows Using the Indirect