A company uses the indirect method to prepare the statement of cash flows.How will the adjustment to reflect the amount of cash payments to employees be presented on the statement?

Question

Quizplus · Accepted Answer

The adjustment to reflect the amount of cash payments to employees will be presented as an increase or decrease in accrued expenses for the period, which will then adjust net income in the operating activities section. This is because the cash payments to employees are not always made immediately, and therefore need to be adjusted for in the accrual accounting system used in the indirect method of preparing the statement of cash flows.

A Company Uses the Indirect Method to Prepare the Statement