Georgia Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Georgia Corp Comparative Balance Sheet December 31, 2019 and 2018 2019 2018 Increase / (Decrease) Cash $45,000 $27,000 $18,000 Accounts Receivable 48,000 45,000 3,000 Merchandise Inventory 180,000 132,000 48,000 Total Assets $273,000 $204,000 $69,000 How will the change in Accounts Receivable be shown on the statement of cash flows?

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Business

Selena Holmes

1 March, 22:03

Georgia Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Georgia Corp Comparative Balance Sheet December 31, 2019 and 2018 2019 2018 Increase / (Decrease) Cash $45,000 $27,000 $18,000 Accounts Receivable 48,000 45,000 3,000 Merchandise Inventory 180,000 132,000 48,000 Total Assets $273,000 $204,000 $69,000 How will the change in Accounts Receivable be shown on the statement of cash flows?

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Jerimiah Logan · Answer 1

($3,000)

An outflow

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.

In cash flow statements, an increase in assets (other than cash) is treated as a cash outflow while a decrease is considered as an inflow of cash.

Hence if accounts receivables balance increases from $45,000 i 2018 to $48,000 in 2019, the change of $3,000 will be shown as an outflow.