Using the indirect method, depreciation expense for the period
A)is deducted from net income.
B)is ignored.
C)causes cash to decrease.
D)is added to net income.

Question

Quizplus · Accepted Answer

Depreciation expense does not affect cash flow because it is a non-cash expense. Therefore, in the indirect method of preparing the cash flow statement, depreciation expense is added back to net income to adjust for the fact that it reduced net income but did not reduce cash.

Using the Indirect Method, Depreciation Expense for the Period