Recording depreciation expense does which of the following?
A) It reduces profit but does not affect the amount of cash generated by a company.
B) It does not affect profit or the amount of cash generated by a company.
C) It reduces profit and increases the amount of cash generated by a company.
D) It reduces both profit and the amount of cash generated by a company.

Question

Quizplus · Accepted Answer

Recording depreciation expense reduces the carrying value of a fixed asset on the balance sheet and reduces profit on the income statement, but it does not affect the actual amount of cash generated by the company. This is because depreciation is a non-cash expense that represents the gradual loss of value in an asset over time, and it is not a cash outflow. Therefore, choice A is the best answer.

Recording Depreciation Expense Does Which of the Following