Question

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income.

Answer 1

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a non cash reduction to net income. Depreciation is a non cash reduction because it notes down the the reduction in the value of an asset due to use as an expense and because the company isn't making any cash transactions due to depreciation of assets therefore it is a non cash expense and this is why it is added back to net income when preparing cash flow from operating activities.

Step-by-step explanation: