Accounting · Cash Flow Statement
Under the indirect method of calculating cash flows from operating activities, how are an 'Increase in Prepaid Expenses' and a 'Decrease in Outstanding Expenses' treated in relation to Net Profit?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Increase in Prepaid Expenses is subtracted; Decrease in Outstanding Expenses is added.
- 2Increase in Prepaid Expenses is added; Decrease in Outstanding Expenses is subtracted.
- 3Both are subtracted from Net Profit.✓
- 4Both are added to Net Profit.
Correct answer
Both are subtracted from Net Profit.
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