Accounting for IGCSE & O level - Accounting Procedures (Section 23 - No. 13)
What impact does depreciation have on a company's cash flow?
It decreases cash flow.
It increases cash flow.
It has no direct impact on cash flow.
It can either increase or decrease cash flow depending on the depreciation method.
Explanation
Depreciation is a non-cash expense. It reduces net income, but it does not involve any actual outflow of cash.
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