How to know when will we incraese or decrease in account paybable and account receivable in...

How to know when will we incraese or decrease in account paybable and account receivable in cash flows ?

Expert Solution

Cash flow Statement is nothing but the statement shows the in and out flow of the cash during the said period of the organisation.

In case of Accounts Payable -

When Accounts payable increases, the cash flow will be increased to the extent of increase in Accounts payable and cash flow will be decreased to the extent of decrease in accounts payable. It is because, when account payable increases it means that cash you need to pay has been saved without paying to the person and also when it decreases it means that you had paid cash from your hand so that your cash in hand or bank will be reduced.

In case of Accounts Receivable -

When Accounts receivable increases, the cash flow will be decreases to the extent of increase in Accounts Receivable and Cash flow will increase to the extent of decrease in Accounts Receivable. It is because, when Accounts Receivable increases it means that you didnt receive any cash that you required to receive and when it decreases it means that you have received cash during the period and so your cash in hand or bank increases.

ekkarill92 answered 2 years ago

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