Question

When reporting operating activities in a statement of cash flows, depreciation is: Multiple Choice ignored in the indirect method. added back to net income in the indirect method. subtracted from net income in the indirect method. added back to net income in the direct method.

Answer 1

Answer:

added back to net income in the indirect method

Explanation:

Depreciation is an expense indicating a reduction in the value of the capital assets due to tear and wear, obsolescence, consumption, time span, etc. It's shown on the income statement debit side. It is a non-cash item that has no effect on the cash balance.

So while reporting operating activities using indirect method we added back the depreciation expense to net income