Accounts receivable does not appear directly on the cash flow statement, but changes in accounts receivable are a critical adjustment within the operating activities section. Under the indirect method of preparing cash flows—the most common approach—you start with net income and then adjust for changes in working capital accounts, including accounts receivable. When accounts receivable increases, it means revenue was recorded but cash wasn't collected yet, so you subtract that increase from net income. Conversely, when accounts receivable decreases, it indicates cash was collected from previous sales, so you add that decrease back. This adjustment appears as a line item like "decrease in accounts receivable" or "accounts receivable change" under operating activities. Under the direct method, which is less commonly used, cash receipts from customers are shown directly without this adjustment. The key principle is that the cash flow statement reconciles net income (which includes accrual-based revenues) back to actual cash received, and accounts receivable changes are essential to this reconciliation since they represent a timing difference between when revenue is earned and when cash is collected.