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Depreciation expense is recorded as an expense and therefore a reduction of net income on the...

Depreciation expense is recorded as an expense and therefore a reduction of net income on the Company's income statement, but is considered a non-cash expense for purposes of determining cash flow from operations on the statement of cash flows. True or False?

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Answer #1

Depreciation is the writing of fixed asset in the income statement due to its usage or wear and tear. While calculating the net income it shall be reduced. Due to charging of the depreciation expenses, there is no cash outflow is done. Therefore, while calculating cash flows it shall be added back to the net income. Since it is a non cash expense.

Therefore, the above statement is True.

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