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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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What does an increase in accounts payable imply? How would this increase in accounts payable be reported under the indirect method?

To determine

Introduction:

The indirect method helps the company to convert accrual basis of accounting to cash basis by adjusting the net income. It can be done by adding back non-cash expenses such as depreciation on fixed asset, amortization, bad debts written off and any losses on the sale of a fixed asset and by subtracting net income such as profit from sale of asset, dividend received.

To state:

What do we mean by increase in accounts payable and where is it recorded in the cash flow statement using indirect method.

Explanation

Increase in accounts payable means the company purchased inventory on credit which leads to an increase in current liability. It is the difference between accounts payable in the beginning to the accounts payable at the end...

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