Depreciation expense reduces profit for the year but does not reduce the net cash from operating activities.

Name: Depreciation expense reduces profit for the year but does not reduce the net cash from operating activities.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense, which means it does not require an outflow of cash. Therefore, it is added back to net income when calculating net cash from operating activities in the statement of cash flows. However, it does reduce profit for the year on the income statement.

Depreciation Expense Reduces Profit for the Year but Does Not