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When Adjusting profit before tax to arrive at cash generated from operations, a decrease in receivable is added to profit before tax. True or False?

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Question added by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Date Posted: 2016/02/09
abdelaziz allam
by abdelaziz allam , محاسب اول , شركة كامبردج مصر للاستثمار التعليمي ش.م.م

True in  Indirect  method of Cash Flow

Luca Salvi
by Luca Salvi , Executive Vice President , Italian Energy Products LLC

This is true, changes in accounts receivable on the balance sheet from one accounting period to the next must also be reflected in cash flow. If accounts receivable decreases, this implies that more cash has entered the company from customers paying off their credit accounts - the amount by which AR has decreased is then added to net sales. If accounts receivable increase from one accounting period to the next, the amount of the increase must be deducted from net sales because, although the amounts represented in AR are revenue, they are not cash.

Anita Chatrani
by Anita Chatrani , Team Leader-Enhance , WJ Towell Co LLC

True, As per Indirect  method of Cash Flow from operations, decrease in receivables is added to Profits to arrive at cash generated from operations.

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