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08-12-2022
Business

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gilliam industries records revenue of $6.4 million for an accounting period. in that same accounting period, they have a beginning balance of $392,000 and an ending balance of $439,000 in the accounts receivable account. how should the cash flows from operating activities be adjusted to account for these items? why? assume gilliam uses the indirect method.

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14-12-2022

Gilliam industries will have to adjust for the change in Accounts Receivable.

Revenue recorded = $6.4 million

Beginning balance = $392,000

Ending balance = $439,000

The amount of net income must be adjusted to account for operating items that typically affect net income alone when calculating cash flow from operating activities using the indirect method.

Calculating the change in accounts receivable

= Beginning balance - Ending balance

= 392,000 − $439,000

= - 47,000

In order to account for the change in Accounts Receivable, Gilliam industries will need to reduce cash flows from operating activities by $47,000. As a result, the business will need to make adjustments for the change in Accounts Receivable.

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