When preparing the statement of cash flows using the indirect method,non-cash expenses such as amortization is added to net income to arrive at cash flows from operating activities.

Question

Quizplus · Accepted Answer

Non-cash expenses like amortization, depreciation, and depletion are added back to net income or deducted from net income under the indirect method while preparing the statement of cash flows to arrive at cash flows from operating activities. This adjustment is made because these expenses do not involve cash transactions but still impact the overall cash position of the company.

When Preparing the Statement of Cash Flows Using the Indirect