When reporting operating activities in a statement of cash flows, depreciation is:
A) added back to net income in the direct method.
B) ignored in the indirect method.
C) added back to net income in the indirect method.
D) subtracted from net income in the indirect method.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that has been subtracted from revenue in calculating net income. Therefore, it must be added back to net income when preparing a statement of cash flows using the indirect method.

When Reporting Operating Activities in a Statement of Cash Flows