Under the indirect method,depreciation expense is added to net income to arrive at cash flow from operating activities.Depreciation is handled this way because

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Depreciation is a non-cash expense that is deducted in arriving at net income but does not reduce cash. Therefore, under the indirect method, depreciation expense is added back to net income to arrive at cash flow from operating activities. This adjustment helps to reconcile the differences between net income and cash flow from operating activities by adjusting for non-cash expenses like depreciation. Choice A is incorrect because depreciation is not an inflow of cash. Choice B is incorrect because depreciation is not subtracted in arriving at net income, it is already subtracted. Choice D is incorrect because depreciation does not belong to investing activities, it belongs to operating activities.

Under the Indirect Method,depreciation Expense Is Added to Net Income