When using the indirect method for the statement of cash flows,depreciation expense is added to net income to obtain cash provided by operating activities.

Question

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Depreciation expense is a non-cash expense that is added back to net income when applying the indirect method to the statement of cash flows. This is because depreciation decreases net income but does not represent an actual outflow of cash, so it is added back to obtain cash provided by operating activities.

When Using the Indirect Method for the Statement of Cash