Under the indirect method to prepare the statement of cash flows,a decrease in accounts payable is deducted from net income when calculating Net cash provided by operating activities.

Question

Quizplus · Accepted Answer

According to the indirect method, a decrease in accounts payable represents a use of cash since it indicates that fewer payments were made to suppliers, resulting in an increase in the amount owed. Therefore, it is deducted from net income when preparing the operating activities section of the statement of cash flows.

Under the Indirect Method to Prepare the Statement of Cash