Question

Currently Digby is charged $6,664,000 Depreciation on the Income Statment. Digby is planning for an increase in this depreciation. What will this do on Digby 's financial statements? Just impact the Balance Sheet Statement Have no impact on the Net Cash from Operations as Depreciation appears in both the Cash Flow Statement and the Income Statement Increase Net Cash From Operations on the Cash Flow Statment Decrease Net Cash from Operations on the Cash Flow Statmen

Answer 1

Answer:

Increase Net Cash From Operations on the Cash Flow Statement

Explanation:

Depreciation: It is a decrease in the value of the fixed assets due to tear and wear, obsolescence, usage, etc. It is only charged on fixed assets like building, plant and machinery, furniture and fixtures, etc.  

Cash flow under operating activities: In this, the depreciation is added to the net income because it is a non-cash item and it records only cash transactions but in the income statement it is treated as an expense so the depreciation amount will be deducted.

It is added in the operating activity because to compute the accurate balance of the operating activity which ultimately increases the balance of the operating activity.