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    billyj444's Avatar
    billyj444 Posts: 1, Reputation: 1
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    #1

    Nov 2, 2009, 07:45 AM
    Statement of cash flows using the indirect method
    If I'm working on a problem with that statement of cash flows using the indirect method and the question asks to record depreciation but only gives the depreciation amount(for example the depreciation recorded on fixed assets for the year was 30,000) how do I record this on a journal entry? Please help!
    hamzashakaa's Avatar
    hamzashakaa Posts: 161, Reputation: 8
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    #2

    Nov 2, 2009, 11:42 AM

    The depreciation expense should be added to Net income in the statement of cash flows because it is a non cash item. The entry that should be recorded in the accounting system is
    Dr. Depreciation expense 30,000
    Cr. Accumulated Depreciation 30,000
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #3

    Nov 2, 2009, 11:04 PM
    Quote Originally Posted by billyj444 View Post
    If I'm working on a problem with that statement of cash flows using the indirect method and the question asks to record depreciation but only gives the depreciation amount(for example the depreciation recorded on fixed assets for the year was 30,000) how do I record this on a journal entry? Please help!
    I personally feel that while preparing a statement of cash flows, no journal entries are ever needed.

    However, if you are using a work sheet method to compile a statement of cash flows then the amount of depreciation charged in the accounts is added back to net income as it does not involve cash outlay. Still this is just a paper entry not an accounting entry.

    Principles of Accounting Chapter 16
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #4

    Nov 5, 2009, 03:12 AM

    There are problems that require journal entries be made off the cash flow statement. This is obviously not realistic since all entries would have already been completed, but occasionally I see problems that just do this. I'm supposing the point is to see how these items would have affected the various accounts -- quite personally I don't get it but I don't write the problems.

    Or, OP could be confused of course. :-)
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