If Accounts Payable increases from the beginning of the periodto the end of the
ID: 2445587 • Letter: I
Question
If Accounts Payable increases from the beginning of the periodto the end of the period, how will that fact show up on thestatement of cash flows? Explain your answer in a sentence ortwo. Correct me if i am wrong but the correct answer for thiswoiuld be it woiuld show up as being adjusted into the Net Incomeright??? If Accounts Payable increases from the beginning of the periodto the end of the period, how will that fact show up on thestatement of cash flows? Explain your answer in a sentence ortwo. Correct me if i am wrong but the correct answer for thiswoiuld be it woiuld show up as being adjusted into the Net Incomeright???Explanation / Answer
Yes, you are correct ! Accounts payable is a current liability. When there is an increasein a liability, add it back to Net Income. Why is it added back ?When a liability increases, the business is using some one's cashand is good for the cash flow. Hence it make sense to add back.