Virginia Company uses the indirect method to prepare the statement of cash flows

Question

Virginia Company uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Virginia Company Comparative Balance Sheet December 31, 2018 and 2017 2018 Accounts Payable Accrued Liabilities Long-term Notes Payable otal Liabilities $4,000 2,000 84,000 $90,000 2017 Increase/(Decrease) $(2,000) 1,000 (6,000) (7,000) $6,000 1,000 90000 $97,000 How will the change in Accounts Payable be shown on the statement of cash flows? 0 A, as an addition to operating cash flows O B. as an addition to Net Income O C. as a deduction from Net Income O D. as a deduction from investing cash flows

Explanation / Answer

The decrease in accounts payable(current liabiltiies) is an outflow of cash for the period which would be deducted from net income in computation of cash flow from operating activities for the period under the indirect method.

Hence the correct option is a deduction from net income(C).

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