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When adjusting accrual earnings to obtain cash flows from operations, Multiple Choice an increase in Accounts Payable...

When adjusting accrual earnings to obtain cash flows from operations,

Multiple Choice

  • an increase in Accounts Payable is deducted to determine cash flows from operations.

  • a decrease in Accounts Payable is added to determine cash flow from operations.

  • it is not necessary to consider any changes to Accounts Payable.

  • an increase in Accounts Payable is added to determine cash flow from operations.

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Answer #1

The answer is

  • an increase in Accounts Payable is added to determine cash flow from operations

Accounts payable is a liability for the company

Cost of goods sold is already accounted for in cash from from operations as it starts with net income

Increase in accounts payable means that payment has not yet been done and hence, cash has been saved

It is therefore added to determine cash flow from operations

A decrease is deducted

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