Answer:
Depreciation expense
Explanation:
There are three types of activities in the cash flow statement which are described below:
1. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.
These changes in working capital would be adjusted
2. Investing activities: It records those activities which include purchase and sale of the fixed assets
3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.
Depreciation is a non cash expense so it would be added in the net income under the indirect method.
This is the format:
Cash flow from Operating activities - Indirect method
Net income $6,700
Adjustment made:
Add : Depreciation expense
Add: Loss on sale of the asset
Less: Gain on sale of the asset
Add: Decrease in accounts receivable
Less: Increase in inventory
Less: Decrease in accounts payable
Add: Increase in salaries payable
Add: Increase in utility payable
Less: Decrease in prepaid insurance
Add: Increase in prepaid rent
Total of Adjustments
Net Cash flow from Operating activities
