Cash Flow Statement:
Cash Flow Statement is a fundamental financial statement that renders valuable information regarding the
In operating activities, cash affected transactions only recorded. In investing activities, investing transactions are recorded and in financial activities involve
To determine: The reason why
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- Why is depreciation an addition in the operating section of the statement of cash flows, when prepared by the indirect method?arrow_forwardUnder the direct method of preparing a statement of cash flows, what adjustment is made for depreciation expense?arrow_forwardExplain how depreciation expense is reported in the Statement of Cash Flows using the indirect method. Why is it reported this way?arrow_forward
- Justification for adding depreciation expenditures to net income in the operating activities portion of the cash flow statement, rather than include them in net income when using indirect method.arrow_forwardUnder the indirect method, depreciation expense is addedto net income to report cash flows from operating activities. Does depreciation cause an inflow of cash?arrow_forwardTo account for cash flows from operational operations, the indirect method adds depreciation expenditure to net income. Is there an increase in cash due to depreciation?arrow_forward
- Explain why depreciation, depletion, and amortization cost are added to net income in the operating activities part of the statement of cash flows when using the indirect method in the operating activities section of the statement of cash flows.arrow_forwardWhen using the indirect method to determine operating cash flows, how is depreciation expense recorded on the Statement of Cash Flows?arrow_forwardExplain why depreciation expenditure, depletion expense, and amortization expense are added to net income in the operating activities part of the statement of cash flows when the indirect method is used.arrow_forward
- Depreciation expenses are subtracted from net income using the indirect method to arrive at the cash flow supplied by operations.arrow_forwardUsing the indirect method, depreciation expense is deducted from net income to calculate cash provided by operations.arrow_forwardFor purposes of calculating cash given by operations, the indirect approach subtracts depreciation expenditure from net income before calculating cash provided by operations.arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College