Which Statement Is False Regarding the Preparation of the Indirect

question 60

Multiple Choice

Which statement is false regarding the preparation of the indirect method of the statement of cash flows? 

• A) An increase in merchandise inventory is subtracted from net income.
• B) Depreciation expense is added to net income.
• C) An increase in accounts receivable is added to net income.
• D) An increase in accounts payable is added to net income.

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Definitions:

Limited Liability Partnerships (LLP)

A legal structure for businesses where partners' liabilities are limited to their investment in the company, protecting personal assets from business debts.

Personal Liability

Personal liability is an individual's legal responsibility to repay debt or fulfill obligations from personal assets if the business or venture they are involved in fails to meet these obligations.

Pass-Through Tax Entity

A business structure that avoids corporate tax, instead, profits and losses are passed through to the individual owners' tax returns.

Fajitas

A Tex-Mex culinary dish consisting of grilled meat, usually served with vegetables and tortillas on the side.