When Preparing the Statement of Cash Flows Using the Indirect

Multiple Choice

When preparing the statement of cash flows using the indirect method for determining net cash flows from operating activities, depreciation is added to net income because:

A) It was deducted as an expense on the income statement, but does not require cash.
B) It was deducted as an expense on the income statement and affects the amount of cash.
C) It is a significant portion of the year's expenses.
D) It represents a source or inflow of cash.