A Decrease in Accounts Receivable Should Be Presented in a Statement

question 42

Multiple Choice

A decrease in accounts receivable should be presented in a statement of cash flows (indirect method) as

• A) an inflow and outflow of cash.
• B) an outflow of cash.
• C) a deduction from net income.
• D) an addition to net income.

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Definitions:

Accounts Receivable

Funds that customers owe to a business for products or services already provided but not yet compensated for.

Maker

The entity that issues or creates a promissory note and agrees to pay the note's amount to a specified party.

Allowance for Doubtful Accounts

A contra-asset account on a company's balance sheet that represents the amount of receivables the company expects may not be collected due to customer defaults.

Contra Asset

An account listed in a company's balance sheet that is used to reduce the balance of a related asset account, showing the amount that effectively reduces the original asset's value.