Why is depreciation expense added to net income when reconciling net income to net cash provided by operating activities?
A)Because depreciation expense represents a cash inflow
B)Because depreciation expense is a tax deduction that reduces the payment of taxes
C)Because depreciation expense conserves cash outflows for taxes
D)Because depreciation expense reduces net income but it has no effect on cash,so we add depreciation expense to net income to cancel the deduction

Question

Quizplus · Accepted Answer

Depreciation expense reduces net income but it has no effect on cash, so we add depreciation expense to net income to cancel the deduction and arrive at net cash provided by operating activities.

Why Is Depreciation Expense Added to Net Income When Reconciling