medium · Principles of Finance
A firm incurs $20,000 in utility expenses during December but only pays $15,000 of that in cash before the books close.
How does the remaining $5,000 affect the Statement of Cash Flows?
- The $5,000 increase in Accrued Utilities is added back to Net Income.
- The $5,000 is subtracted from Net Income because it is an unpaid debt.
- The $5,000 is recorded as a Financing inflow.
- The $20,000 is added back to Net Income, and $15,000 is subtracted.
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