Because depreciation is not cash-based, it is NOT reported in the direct method of the Statement of Cash Flows.

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Depreciation is a non-cash expense, meaning it does not involve the actual outflow of cash. Therefore, it is not included in the direct method of the Statement of Cash Flows, which only shows cash inflows and outflows from operating, investing, and financing activities. Depreciation may be included in the indirect method of the Statement of Cash Flows, which reconciles net income to cash flows from operating activities by adjusting for non-cash items such as depreciation.

Because Depreciation Is Not Cash-Based, It Is NOT Reported in the Direct