Since depreciation expense reduces net income,companies will add depreciation expense back to net income as a step in arriving at net cash flows from operations under the indirect method.

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense that is recorded to allocate the cost of a long-term asset over its useful life. It does not involve an actual cash outflow, so it is added back to net income under the indirect method to arrive at net cash flows from operations.

Since Depreciation Expense Reduces Net Income,companies Will Add Depreciation Expense