We explain the three types of adjustments in the next three sections

We explain the three types of adjustments in the next three sections

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We explain the three types of adjustments in the next three sections. Depreciation Expense Helpful Hint Depreciation is similar to any other expense in that it reduces net income. It differs in that it does not involve a current cash outflow; that is why it must be added back to net income to arrive at cash provided by operations. Computer Services' income statement reports depreciation expense of $9,000. Although depreciation expense reduces net income, it does not reduce cash. In other words, depreciation expense is a noncash charge. The company must add it back to net income to arrive at net cash provided by operating activities. Computer Services reports depreciation expense as follows in the statement of cash flows. Illustration 12-7 Adjustment for depreciation As the first adjustment to net income in the statement of cash flows, companies frequently list depreciation and similar noncash charges such as amortization of intangible assets, depletion expense, and bad debt expense. Loss on Sale of Equipment
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We explain the three types of adjustments in the next three sections

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