Chapter 12, Problem 21Q

To determine

Statement of cash flows

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Cash flows from operating activities

These refer to the cash received or cash paid in day-to-day operating activities of a company.

Direct method

Direct method uses the basis of cash for preparing the statement of cash flows.

To explain: Why depreciation expense is not reported in the cash flow from operating activities section under direct method.