Under the indirect method of preparing the statement of cash flows, an increase in accounts receivable is: deducted from net sales

Accounting Mar 20, 2021

Under the indirect method of preparing the statement of cash flows, an increase in accounts receivable is:

1. deducted from net sales.
2. added to net sales.
3. added to net income.
4. deducted from net income.

Expert Solution

Answer: d .

Increase in current assets and decrease in current liabilities are deducted from net income while preparing cash flow statement using indirect method. If accounts receivables (current asset) increases, it will be deduct from net income.

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