13. Based on the cash flow statement, which of the following answer is correct?

Question

13. Based on the cash flow statement, which of the following answer is correct? A. Decrease in short-term notes payable need to be added 37,800 to cash flow from B. Decrease in short-term notes payable need to be added 37,800 to cash flow from financing C. Decrease in short-term notes payable need to be deducted C37,800 to cash flow from D. Decrease in short-term notes payable need to be deducted 37,800 to cash flow from operating activities. activities financing activities. operating activities.

Explanation / Answer

Answer is option (D). Decrease in short-term notes payable need to be deducted 37800 to cash flow from operating activities.

Explanation;

As we know that decrease in short-term notes payable is the outflow of cash hence it will be deducted from cash flow from operating activities. Thus option (D) is correct answer.

Apart from this any increase in current assets and decrease in current liabilities is deducted from cash flow from operating activities. Any decrease in current assets and increase in current liabilities is added to cash flow from operating activities. And we know that short-term notes payable is a part of current liabilities hence decrease in it will be deducted from cash flow from operating activities.

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