Asked by Milano Irvin on May 13, 2024
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Depreciation is subtracted from net income in arriving at a firm's cash flow from operations under the indirect method to cash flow statement preparation.
Depreciation
The systematic reduction in the recorded cost of a fixed asset to allocate its cost over its useful life, reflecting wear and tear, decay, or obsolescence.
Net Income
The total profit or loss of a company after all expenses, including taxes and operating costs, have been deducted from revenues.
Indirect Method
The indirect method is a way of reporting cash flows from operating activities by starting with net income and adjusting for non-cash transactions.
- Differentiate between the direct and indirect techniques for reporting cash flows from operating activities.
- Gain insight into the influence of depreciation on cash flow from operations and how it is documented in cash flow statements.
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Learning Objectives
- Differentiate between the direct and indirect techniques for reporting cash flows from operating activities.
- Gain insight into the influence of depreciation on cash flow from operations and how it is documented in cash flow statements.
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