Which of the Following Items Would Be Subtracted from Net

question 60

Multiple Choice

Which of the following items would be subtracted from net income when using the indirect method of calculating cash flows provided by operating activities?

• A)A decrease in accounts receivable
• B)Depreciation expense
• C)A decrease in salaries payable
• D)A loss on the sale of equipment

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Definitions:

Accounts Receivable

Funds that clients or customers owe to a company for products or services provided but for which payment has not yet been received.

Accounts Payable

Money owed by a company to its suppliers or vendors for goods and services received, representing a liability on the balance sheet.

Direct Method

A financial accounting method that allocates service department costs directly to production departments without considering services rendered between service departments.

Net Income

The final earnings of a corporation, calculated by subtracting all operating costs and tax liabilities from its total sales revenue.