On a statement of cash flows prepared using the direct method, cash from customers would be sales plus a(n)
A)decrease in accounts payable.
B)increase in accounts payable.
C)decrease in accounts receivable.
D)increase in accounts receivable.
E)None of these answers is correct.

Question

Quizplus · Accepted Answer

The direct method of preparing a statement of cash flows involves the itemization of all cash receipts and cash disbursements during the period, including cash received from customers. Since an increase in accounts receivable means customers owe more money to the company, the decrease in accounts receivable would mean an increase in cash received from customers, and vice versa. Therefore, cash from customers would be sales plus a decrease in accounts receivable.

On a Statement of Cash Flows Prepared Using the Direct