Where can depreciation and amortization amounts typically be found?

Where can depreciation and amortization amounts typically be found?

• A. Cash Flow Statement
• B. Income Statement
• C. Balance Sheet
• D. Statement of Changes in Equity

Answer: (A)

Depreciation and amortization are non-cash charges. They reduce reported net income but don’t involve an actual cash outflow in the period. Because of this, when calculating cash flow from operations you add them back to net income to reflect the cash that was generated (or used) aside from these non-cash expenses. The cash flow statement shows depreciation and amortization as an operating-activities adjustment, named clearly to reconcile net income to cash from operations. On the income statement you’ll see these as expenses, and on the balance sheet you’ll see the accumulated depreciation and amortization (reductions to asset values) rather than the per-period cash amounts. So the place to locate the amounts used to adjust cash flow is the cash flow statement.

Depreciation and amortization are non-cash charges. They reduce reported net income but don’t involve an actual cash outflow in the period. Because of this, when calculating cash flow from operations you add them back to net income to reflect the cash that was generated (or used) aside from these non-cash expenses. The cash flow statement shows depreciation and amortization as an operating-activities adjustment, named clearly to reconcile net income to cash from operations. On the income statement you’ll see these as expenses, and on the balance sheet you’ll see the accumulated depreciation and amortization (reductions to asset values) rather than the per-period cash amounts. So the place to locate the amounts used to adjust cash flow is the cash flow statement.