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An increase in accounts payable represents an increase in net cash provided by operating activities just like borrowing money from a bank. An increase in accounts payable has an effect similar to taking out a new bank loan. However, these two items show up in different sections of the statement of cash flows to reflect the difference between operating and financing activities. True or false?

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Answer:

The correct answer is True.

Explanation:

An increase in accounts payable indicates a positive cash flow. The reason for this comes from the accounting nature of the accounts. When a company buys goods on account, it does not spend cash immediately. Therefore, accountants see this as an increase in cash. Typically, accountants list an increase in accounts payable in a simple line for the statement of cash flows.

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