Company E
The following items were obtained from Company E's financial records:
$\begin{array}{llr}
\text { Accounts receivable, December 31 , Year 2 } &\$100,000\
\text { Accounts receivable, December 31, Year 1 } &144,000\
\text { Sales for Year 2} &945,000
\end{array}$

-Refer to the figure Company E.Under the indirect method,how would the change in accounts receivable be reported in the operating activities section of Company E's statement of cash flows?

Question

Company E
The following items were obtained from Company E's financial records:
 $\begin{array}{llr}
  \text { Accounts receivable, December 31 , Year 2  } &\$100,000\
 \text { Accounts receivable, December 31, Year 1  } &144,000\
 \text {  Sales for Year 2} &945,000
\end{array}$

-Refer to the figure Company E.Under the indirect method,how would the change in accounts receivable be reported in the operating activities section of Company E's statement of cash flows?

Quizplus · Accepted Answer

When using the indirect method for the statement of cash flows, changes in accounts receivable are adjusted against net income to reflect the cash basis of accounting. An increase in accounts receivable indicates that not all sales have been collected in cash, so it is deducted from net income. Conversely, a decrease in accounts receivable suggests more cash has been collected than sales reported on an accrual basis, so it is added to net income.

Company E the Following Items Were Obtained from Company E's

Company E
the Following Items Were Obtained from Company E's