When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

Question

Quizplus · Accepted Answer

The indirect method of preparing the operating activities section of the statement of cash flows requires adding back non-cash expenses such as depreciation and amortization to net income to arrive at cash from operating activities. These expenses do not require cash outflows and thus must be added back.

When Preparing the Operating Activities Section of the Statement of Cash