CIMA BA3 · Chapter 12 · Question 9 of 10
Using the indirect method, how does an increase in trade payables during the year affect cash generated from operations?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is added to profit, because the business has paid less cash than the expenses charged
Explanation
An increase in payables means some expenses charged in profit or loss have not yet been paid, so cash outflows are lower than the expense and the increase is added back.
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