In this cash flow framework, where would you search for depreciation and amortization expense?

• A. Cash Flow Statement — Cash from Operations
• B. Income Statement — Operating Expenses
• C. Balance Sheet — Assets
• D. Cash Flow Statement — Investing Activities

Answer: (A)

Depreciation and amortization are non-cash charges that reduce net income but don’t use cash. In the cash flow framework, you adjust net income in the cash flows from operating activities to convert accrual-based income to cash. So these expenses are added back in the operating activities section of the cash flow statement (typically in the indirect method) to reflect actual cash generated from core operations. They aren’t cash outflows in investing activities, and while they originate from the income statement, the cash flow treatment happens in the operating section. On the balance sheet you’d see accumulated depreciation, but the expense itself is handled in the operating activities reconciliation.