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

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense that reduces net income but has no effect on cash. Therefore, it needs to be added back to net income to reconcile net income with cash flows from operating activities.

Depreciation Expense Is Added to Net Income When Reconciling Net