Under the Indirect Approach,in Preparing the Cash from Operations Section

question 57

Multiple Choice

Under the indirect approach,in preparing the cash from operations section of the Statement of Cash Flows,depreciation is added to net income because

• A)it is not a cash expense.
• B)it is a cash outflow.
• C)it is a source of cash.
• D)it is not an allowable expense in determining net income.

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Definitions:

General Partner

A member of a partnership who has unlimited liability and takes part in the daily operations of the business.

Taxed

Subjected to a financial charge or levy by a governmental organization in order to fund various public expenditures.

S Corporation

A close corporation whose shareholders have elected to be taxed essentially like partners are taxed under federal income tax law. Also called subchapter S corporation.

Limited Partnership

A partnership structure where at least one partner has unlimited liability, and at least one partner has limited liability.