Depreciation is an accrual accounting entry that does not affect the cash account so it needs to be adjusted for when using the indirect method of the Cash Flow Statement.

Question

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Depreciation is a non-cash expense that is added back to the net income when preparing the operating activities section of the cash flow statement using the indirect method. This adjustment is necessary because the depreciation expense does not affect the cash account directly.

Depreciation Is an Accrual Accounting Entry That Does Not Affect