Question

Which of the following is added to net income to reconcile to cash from operations?

A. Increases in accounts receivable
B. Increases in inventory
C. Increase in taxes payable
D. Decrease in accounts payable
E. None of the above

Answer 1

E. None of the above

Explanation:

The only two accounts that you must add to net income are the amortization and depreciation

In order to reconcile net income to cash from operations the Amortization and Depreciation must be added to Net Income.

Why? because These accounts: Amortization and Depreciation are not cash accounts. This means that the figures in amortization and Depreciation are not actual outflows of cash but just a bookkeeping figure.