Depreciation and amortization expense needs to be added back to net income if preparing the statement of cash flows using the indirect method.

Question

Quizplus · Accepted Answer

Depreciation and amortization expense are non-cash expenses and are therefore added back to net income when preparing the statement of cash flows using the indirect method. This is because these expenses do not involve the actual outflow of cash from the company, but rather represent the allocation of the cost of an asset over its useful life.

Depreciation and Amortization Expense Needs to Be Added Back to Net