If the following are balance sheet changes:
$5,005 decrease in accounts receivable
$7,000 decrease in cash
$12,012 decrease in notes payable
$10,001 increase in accounts payablea "use" of funds would be the:
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A. B. C. D.D
To determine the "use" of funds in this scenario, we need to identify which of the balance sheet changes represents a reduction in the company's assets (i.e., a use of funds) rather than a reduction in the company's liabilities (i.e., a source of funds).
A decrease in accounts receivable and an increase in accounts payable both represent a reduction in the company's assets and an increase in liabilities. In other words, these changes indicate that the company has used funds to pay off its obligations to suppliers and other creditors, rather than retaining those funds for other purposes.
On the other hand, a decrease in cash represents a reduction in the company's cash balance and therefore a use of funds. This suggests that the company has either paid out cash to creditors or used it for other purposes such as investing in new assets or paying dividends to shareholders.
Similarly, a decrease in notes payable represents a reduction in the company's liabilities and therefore a source of funds. This could indicate that the company has paid off its debts or renegotiated the terms of its loans to reduce its outstanding obligations.
So, of the four balance sheet changes given, the "use" of funds would be the $7,000 decrease in cash, represented by answer choice A.