In calculating the statement of cash flows, depreciation is added to net income because
A)depreciation represents a net inflow of cash.
B)it is often a large number.
C)it is a non-cash expense that was subtracted to initially lower the taxable income.
D)it represents additional income for the firm.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that is subtracted from revenue to determine taxable income. Therefore, adding it back to net income gives a more accurate picture of the cash generated by the company during the reporting period.

In Calculating the Statement of Cash Flows, Depreciation Is Added