Why are increases in accounts receivable a cash reduction on the cash flow statement?

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Amandeep Singh

Commerce Tutor

because you are not receiving cash against the sale which means your debtors are increasing.In hindi we can say that paise ka na aana bhi jana hota hai.
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Experienced teaching experience for 20 years

Increase in account receivable means that you will not receive cash on sale immediately but later on I.e. holding of cash now and reduction in cash
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CA-Inter Cleared (Accounting Technician Executive)

The simple reason is you are blocking and parking that much of amount in your receivable rather than receiving them immediately..This may be due to by receiving in installment u may earn more than receiving immediately..
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Tutor for Accounts/ Costing/ Direct tax

As you are not getting physical cash at disbursement for now we reduce increase in debtors in cash flow
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Accounts Teacher

When business buys raw materials for manufacturing / ready goods for trading, it pays the supplier cash - Cash Outflow. The raw material is converted into finished goods. At this point, there is an increase in stock (finished goods). Hence, increase in stock is assumed to be cash reduction in cash flow...
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When business buys raw materials for manufacturing / ready goods for trading, it pays the supplier cash - Cash Outflow. The raw material is converted into finished goods. At this point, there is an increase in stock (finished goods). Hence, increase in stock is assumed to be cash reduction in cash flow statement. On the other hand, if a good is sold, and there is immediate receipt of cash, then there is cash inflow and it negates the cash outflow that happened initially. If goods are sold on credit, there is no immediate cash inflow. In other words, the cash that was used to buy the goods initially has not returned to the business. Hence, increase in accounts receivables is cash reduction in cash flow statement read less
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Commerce Tutor

Its just because you have not received cash against the supply of materials..in hindi we can say that paise ka na aana bhi jana hota hai..thats why we reduce cash in cash flow statement.
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Tutor

because the cash have given to debtor and issuance of bill receivable so the firm point of view it's cash outflow
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