On a statement of cash flows using the indirect method, depreciation expense will
A)be added to net income in the operating activities section.
B)be deducted from net income in the operating activities section.
C)appear a cash receipt in the investing activities section.
D)be ignored.

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash charge that reduces net income on the income statement. When preparing the statement of cash flows using the indirect method, depreciation expense is added back to net income in the operating activities section to adjust for the fact that it did not actually use any cash.

On a Statement of Cash Flows Using the Indirect Method