Which of the following statements is incorrect,regarding the effect of depreciation expense on a statement of cash flows using the indirect method?
A)Depreciation expense is not an outflow of cash.
B)Depreciation expense represents an inflow of cash.
C)Depreciation expense is added in the operating activities section of the statement of cash flows.
D)Depreciation expense is not a source of cash.
E)Depreciation expense will reduce the net income used in determining net cash flow from operations.

Question

Quizplus · Accepted Answer

Depreciation expense does not represent an inflow of cash, but rather is a non-cash expense that reduces the value of an asset over time. Therefore, the statement that says depreciation expense represents an inflow of cash is incorrect. The other statements are true.

Which of the Following Statements Is Incorrect,regarding the Effect of Depreciation