Why is it that the depreciation expense will be deducted to net income in statement of cash flow?
submitted by richell

yolanda yorgenson

I think depreciation isn't a cash expense, so it's added back to net income in the cash flow statement because it didn't actually use any cash. That's why it shows up as an adjustment when figuring out cash flow from operating activities.

robert knox

Depreciation is a non-cash expense. That means that it would reduce income, but it doesn't affect cash flow.

When preparing the cash flow statement, you'd add it back to net income in the operating activities section. So, even though it lowers net income, it doesn't affect cash.