(Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, an increase in Depreciation Expense is
A) subtracted from operating expenses.
B) added to operating expenses.
C) subtracted from net income.
D) added to net income.

Question

Quizplus · Accepted Answer

Under the direct method, depreciation expense is not included in the calculation of cash flows from operating activities, as it is a non-cash expense. Therefore, it is subtracted from operating expenses to determine the cash paid for operating expenses.

(Appendix) When Preparing a Schedule for the Calculation of Cash