When the indirect method is used,Depreciation expense is added to net income in order to calculate net cash flow from operating activities.

Question

Quizplus · Accepted Answer

In the indirect method, depreciation expense is added back to net income because it is a non-cash expense and does not affect the actual amount of cash generated or used in operating activities. Therefore, it is added back in order to calculate the actual net cash flow from operating activities.

When the Indirect Method Is Used,Depreciation Expense Is Added to Net