Question

When preparing the statement of cash flows using the indirect method, depreciation expense is added to net income because it ______.

Answer 1

When preparing the statement of cash flows using the indirect method, depreciation expense is added to net income because net income is a starting point in measuring cash flows from operating activities

What is a Balance Sheet?

This refers to the inventory taken for all goods available in a warehouse, showing its financial records.

Hence, we can see that when a person is preparing the statement of cash flows with the indirect method, there is the addition of depreciation expense simply because the net income must be factored in.

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