When Preparing the Operating Activities Section of the Statement of Cash

question 57

True/False

When preparing the operating activities section of the statement of cash flows using the indirect method, depreciation is subtracted from net income.

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Definitions:

Prior-Period Adjustments

Corrections of errors in previously issued financial statements for periods prior to the issuance of the current financial statements.

Net Income

The net income of a business, which is the amount remaining from total revenue after deducting all costs and taxes.

Depreciable Lives

The estimated period over which a fixed asset is considered to be useful and thus can be depreciated for accounting purposes.

Depreciation Expense

The allocation of the cost of a tangible fixed asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.