Accounts Payable & Cash Flow Step by step Solution with Explanation

Your question:

What is the effect of paying an accounts payable on the cash flow statement?

A. Increase in operating cash flow

Accounts Payable & Cash Flow Answers and Explanation

B. Decrease in operating cash flow

Explanation:

• 1. Operating Activities: Cash flows related to the primary business activities of the company.

  2. Investing Activities: Cash flows related to the acquisition and disposal of long-term assets and investments.

Effect of Paying Accounts Payable:

• When a company pays its accounts payable, it is using cash to settle these liabilities. This outflow of cash is reflected in the operating activities section of the cash flow statement.

1. • Cash: $50,000

2. Transaction:

4. Effect on Cash Flow Statement:

   • Operating Activities:

• • Net Income: (starting point)

  • Adjustments for changes in working capital: