Question

Question: If current assets other than cash increase, what is the effect on cash? What about a decrease in current assets other than cash?

Short answer

Answer

If current assets other than cash increase it is reduced from the net income. If there is a decrease in current assets other than cash it causes anincrease adjustment to the net income.

Step-by-step solution

If current assets other than cash increases it is reduced from the net income

An increase in current assets other than cash means either the cash will be received in the future or reduces the cash balance.Therefore, an increase in current assets other than cash causes a decreased adjustment to the income.

If current assets other than cash decreases it is added to the net income

Decrease in current asset is theopposite of increase in current asset and hence it causes an increase adjustment to the net income.