Practicing Success
Identify a non cash item out of the following, shown in Cash Flow Statement. |
Gift items Depreciation Debentures Finance cost |
Depreciation |
The correct answer is Option (2) → Depreciation Depreciation is a non-cash expense that represents the allocation of the cost of tangible assets over their useful lives. It is deducted from the income statement to reflect the wear and tear of assets over time. While it affects the company's profitability, it does not involve an actual cash outflow. In the cash flow statement, depreciation is added back to net income in the operating activities section to reconcile net income to cash provided by operating activities. |