In Determining Net Cash Flow from Operating Activities, a Decrease

question 84

Multiple Choice

In determining net cash flow from operating activities, a decrease in accounts payable during a period

• A) means that income on an accrual basis is less than income on a cash basis.
• B) requires an addition adjustment to net income under the indirect method.
• C) requires an increase adjustment to cost of goods sold under the direct method.
• D) requires a decrease adjustment to cost of goods sold under the direct method.

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Definitions:

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in net income or loss.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.