In preparing a statement of cash flows under the indirect method,an increase in accounts payable would be reported as a(n):
A)Addition to net income in the operating activities section.
B)Deduction from net income in the operating activities section.
C)Financing activity.

Question

Quizplus · Accepted Answer

An increase in accounts payable indicates that a company has incurred expenses for which it has not yet paid cash. In the indirect method of preparing a statement of cash flows, this increase is added back to net income in the operating activities section because it represents a source of cash (i.e., expenses incurred without a corresponding cash outflow).

In Preparing a Statement of Cash Flows Under the Indirect