Under the indirect approach, to preparing the cash from operations section of the cash flow statement, amortization is added to net income because:
A)it is not a cash expense.
B)it is a cash outflow.
C)it is a source of cash.
D)it is not an allowable expense in determining net income.

Question

Quizplus · Accepted Answer

Amortization is added back to net income in the cash flow statement under the indirect method because it is a non-cash expense. It reduces net income on the income statement, but it does not involve an actual outflow of cash.

Under the Indirect Approach, to Preparing the Cash from Operations