Depreciation is an arbitrary allocation of the cost of an asset and as such it is not a cash item and is not reported on the cash flow statement, but it still needs to be deducted from operating profit in the calculation of net cash flows from operating activities.

Question

Quizplus · Accepted Answer

The Answer of Depreciation is an arbitrary allocation of the cost of an asset and as such it is not a cash item and is not reported on the cash flow statement, but it still needs to be deducted from operating profit in the calculation of net cash flows from operating activities.

Depreciation Is an Arbitrary Allocation of the Cost of an Asset