Depreciation expense does not cause a cash outflow for the current period; therefore, it should never be shown on the statement of cash flows.

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense that reduces the value of an asset over time. Although it does not result in a direct cash outflow for the current period, it does impact the company's net income and therefore affects the amount of cash available for future periods. As a result, depreciation expense is included in the operating activities section of the statement of cash flows as an adjustment to net income.

Depreciation Expense Does Not Cause a Cash Outflow for the Current