During Year 7, Frank Company had a net increase in accounts receivable of $10,000.The T-account work sheet for preparing the statement of cash flows
A)adds the increase in accounts receivable in deriving cash flow from operating activities.
B)subtracts the increase in accounts receivable in deriving cash flow from operations.
C)adds the increase in accounts receivable in deriving cash flow from financing activities.
D)subtracts the increase in accounts receivable in deriving cash flow from financing activities.
E)subtracts the increase in accounts receivable in deriving cash flow from investing activities.

Question

Quizplus · Accepted Answer

An increase in accounts receivable indicates that the company has not yet received payment for goods or services sold, which means cash has not been received. Therefore, the increase in accounts receivable is subtracted in deriving cash flow from operations.

During Year 7, Frank Company Had a Net Increase in Accounts