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Why is bond premium amortization recorded as an operating activity on the statement of cash flows?

Question:

Why is bond premium amortization recorded as an operating activity on the statement of cash flows?

Cash Flow Statement:

The cash flow statement is one of three financial statements that public companies are required to publish on a quarterly and annual basis. The purpose of the cash flow statement is to provide investors with an overview of the sources and uses of cash flow.

Answer and Explanation:

Depreciation and amortization are non-cash expenses, however, they are included on the income statement. So, even though the amortization of bond premium is connected to financing activities, it is reconciled on the cash flow statement by deducting from net income in cash flow from operations.


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Using the Statement of Cash Flows for Decision Making

from Accounting 101: Financial Accounting

Chapter 12 / Lesson 5
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