Which of the following statements is CORRECT? Dividends do not show up in the st

Question

Which of the following statements is CORRECT?

Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity.

In the statement of cash flows, a decrease in accounts receivable is reported as a use of cash.

In the statement of cash flows, depreciation charges are reported as a use of cash.

In the statement of cash flows, a decrease in inventories is reported as a use of cash.

In the statement of cash flows, a decrease in accounts payable is reported as a use of cash.

Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity.

In the statement of cash flows, a decrease in accounts receivable is reported as a use of cash.

In the statement of cash flows, depreciation charges are reported as a use of cash.

In the statement of cash flows, a decrease in inventories is reported as a use of cash.

In the statement of cash flows, a decrease in accounts payable is reported as a use of cash.

Explanation / Answer

Option E is correct

Decrease in Accounts payable implies company has paid more cash to its creditors in this period than its previous period. So decrease in A/P is caused by paying more cash.

All other statements are not correct.

Decrease in A/R is caused by collecting more cash.

Decrease in Inventories is caused by collecting more cash.

Depreciation is not a cash item, so it is not included on cash flow statement

Dividends paid is financial cash flow item of the cash flow statement.

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