Depreciation is subtracted from net income in arriving at a firm's cash flow from operations under the indirect method to cash flow statement preparation.

Depreciation

The systematic reduction in the recorded cost of a fixed asset to allocate its cost over its useful life, reflecting wear and tear, decay, or obsolescence.

Net Income

The total profit or loss of a company after all expenses, including taxes and operating costs, have been deducted from revenues.

Indirect Method

The indirect method is a way of reporting cash flows from operating activities by starting with net income and adjusting for non-cash transactions.