Under the indirect method, expenses that do not affect cash are added to net income in the operating activities section of the statement of cash flows.

Question

Quizplus · Accepted Answer

In the indirect method, non-cash expenses such as depreciation and amortization are added back to net income in the operating activities section of the statement of cash flows because these expenses reduce net income but do not involve an actual outflow of cash.

Under the Indirect Method, Expenses That Do Not Affect Cash