To prepare a statement of cash flows (indirect method),which of the following items should be added back to profit to derive "cash flow from operating activities"?
A)Depreciation expense.
B)Increase in trade receivables.
C)Gain on a sale of equipment.
D)Decrease in trade payables.

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash charge that reduces profit but does not affect cash flow, so it is added back to profit in the indirect method of the cash flow statement.

To Prepare a Statement of Cash Flows (Indirect Method),which of the Following