Q14-9RQ
Question
Question: If current assets other than cash increase, what is the effect on cash? What about a decrease in current assets other than cash?
Step-by-Step Solution
Verified Answer
Answer
If current assets other than cash increase it is reduced from the net income. If there is a decrease in current assets other than cash it causes an increase adjustment to the net income.
1Step 1: If current assets other than cash increases it is reduced from the net income
An increase in current assets other than cash means either the cash will be received in the future or reduces the cash balance. Therefore, an increase in current assets other than cash causes a decreased adjustment to the income.
2Step 2: If current assets other than cash decreases it is added to the net income
Decrease in current asset is the opposite of increase in current asset and hence it causes an increase adjustment to the net income.
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