Accounting · Financial Statements & Accrual Concepts
Accounts Receivable Increase
Why does an increase in accounts receivable get deducted on the cash flow statement under the indirect method?
Interview question
- Difficulty
- Easy
- Topic
- Accounting
- Subtopic
- Financial Statements & Accrual Concepts
What this question trains
This problem tests your understanding of the link between accrual accounting and cash flow, especially how to reconcile net income to operating cash flow. In interviews, bankers expect candidates to know that revenue can be recognized before cash is collected, so changes in working capital accounts must be adjusted to show the actual cash impact. It also checks whether you can read financial statements as a connected system, where a balance sheet change affects the cash flow statement because it reflects timing differences between earnings and collections.