Final answer:
In the operating section of the cash flow statement, the full amount of the depreciation expense is added back to the net income because it is a non-cash expense.
Step-by-step explanation:
In the operating section of the cash flow statement, the depreciation expense is added back to the net income because it is a non-cash expense. This is because depreciation is the allocation of the cost of an asset over its useful life, and doesn't involve an outflow of cash. Therefore, the full amount of the depreciation expense is added back to the net income in the operating section to show the true cash generated by the business.
For example, if a company had a net income of $100,000 and a depreciation expense of $20,000, the operating section of the cash flow statement would show a net income of $100,000 plus the $20,000 depreciation expense, resulting in a cash flow from operations of $120,000.