Depreciation expense is not reported on the statement of cash flows when prepared using the direct method.The direct method converts revenues to cash inflows and expenses to cash outflows.Since depreciation is a noncash expense,it does not appear in the operating activities section of the statement of cash flows.

Question

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Depreciation expense is a noncash expense and is therefore not reported on the statement of cash flows prepared using the direct method. It is only reported on the statement of cash flows prepared using the indirect method as an adjustment to net income.

Depreciation Expense Is Not Reported on the Statement of Cash