Recording depreciation:
A)decreases net income and cash flows.
B)decreases net income but has no effect on cash flows.
C)decreases net income,fixed assets,and cash flows.
D)decreases net income but has no effect on fixed assets and cash flows.

Question

Quizplus · Accepted Answer

Recording depreciation is a non-cash expense that reduces the book value of fixed assets but does not affect cash flows. As it reduces net income, option B is the correct answer. Option A and C are incorrect because they state that depreciation reduces cash flows, which is not true. Option D is also incorrect as it states that depreciation has no effect on fixed assets, which is not true as depreciation reduces the book value of fixed assets.

Recording Depreciation