When accrued liabilities increase from the beginning to the end of the year, it means accrued expenses were greater than cash payments of such expenses, and, under the indirect method, the increase in accrued liabilities would be added to net income to convert to cash flow from operating activities. True or false?

Question

Tianna Koch

Business

29 February, 07:47

When accrued liabilities increase from the beginning to the end of the year, it means accrued expenses were greater than cash payments of such expenses, and, under the indirect method, the increase in accrued liabilities would be added to net income to convert to cash flow from operating activities. True or false?

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Answers (1)

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Gaige Chang · Answer 1

True

Explanation:

Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.

These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income