Using the Direct Method
For the following question(s), indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the direct method.
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When using the direct method, where is depreciation expense recorded on the statement of cash flows?
A) Operating activity
B) Investing activity
C) Financing activity
D) Not reported on the statement of cash flows

Question

Using the Direct Method 
For the following question(s), indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the direct method.
-
When using the direct method, where is depreciation expense recorded on the statement of cash flows?
A) Operating activity
B) Investing activity
C) Financing activity
D) Not reported on the statement of cash flows

Quizplus · Accepted Answer

Depreciation expense is a non-cash charge and does not appear in the operating activities section when using the direct method. Instead, it is adjusted for in the indirect method.