These adjustments are fairly simple if you think about the reasoning behind the adjustments.

In terms of accounts receivable, when a sale is made to a customer, the sale is recorded and the customer's credit account is increased by the amount of the sale. When the sale is recorded, your accrual income is increased by the amount of the sale, but no cash is collected until the customer pays his bill. To convert your accrual net profit to cash, you must subtract an increase in accounts receivable. The increase represents income that has been recorded but not yet collected in cash.

A decrease in accounts receivable has the opposite effect — the decrease represents cash collected, but not included in income.