Question

A company uses the indirect method of preparing the statement of cash flows. Current year depreciation expense can be found on the ___________.

Answer 1

The current year depreciation expense can be found on the income statement, which is then adjusted for on the statement of cash flows when using the indirect method.

Step-by-step explanation:

A company that uses the indirect method of preparing the statement of cash flows will typically adjust its net income for changes in working capital accounts and non-cash expenses like depreciation.

The current year depreciation expense can be found on the income statement as a line item since it's an expense recognized in determining the net income. However, in the statement of cash flows, depreciation is added back to net income because it is a non-cash charge, meaning it did not result in an actual outflow of cash during the period.