A depreciation expense is added back to accounting profit when preparing cash flow from operations under the indirect method because depreciation:
Correct answer: A. Is a non-cash expense
- A. Is a non-cash expense
- B. Increases sales revenue
- C. Creates a financing inflow
- D. Reduces current liabilities
Explanation
Depreciation reduces reported profit but does not involve a current cash payment. It is therefore added back when converting accounting profit into operating cash flow.
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