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Explain why depreciation expense should be added back when compiling the statement of cash flow?


If there is an amortization expense account, how would you treat it?

538 day(s) ago

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DorthyP 		Depreciation and amortisation are non-cash expenses and while they should be taken into account in calculating net income, they should not be taken into account when counting the cash flow from operations of the company. So if you start off your statement of cash flows with Net Income, you need to add back depreciation and amortisation to arrive at your actual cash flow from operations.

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