When calculating cash flows from operations, which of the following is added back to net income?

When calculating cash flows from operations, depreciation expense is added back to net income because it is a non-cash expense. In financial accounting, net income is derived using the accrual basis of accounting, which may include expenses that do not involve actual cash outflows during the period, like depreciation. Since depreciation expense reduces net income on the income statement, but does not impact cash flows directly, it needs to be added back to net income when reconciling to cash flows from operating activities. This adjustment ensures that the cash flow statement accurately reflects the actual cash generated or used by the company during a given period.

Other options such as cash dividends paid reflect actual cash outflows and would not be added back; a decrease in accounts payable indicates that cash has been used to pay off creditors, leading to a reduction in cash flow; cash sales revenue already contributes to net income, so it is not added back in the cash flow calculation.