Question

An increase in accrued income during the particular year is ______ the net profit.

Options

• added to

• deducted from

Answer 1

An increase in accrued income during the particular year is deducted from the net profit.

Explanation:

Accrued income is a current asset that represents revenue earned but not yet collected in cash. An increase in accrued income means this non-cash revenue was included in the net profit, making the profit look higher than the actual cash in hand. Under the indirect method of a Cash Flow Statement, this increase must be deducted from the net profit to show the true cash generated from operating activities.