Why might depreciation and amortization differ between the income statement and the cash flow statement?

• A. Because D&A is sometimes embedded within other income statement line items, requiring use of the cash flow statement's D&A to compute EBITDA
• B. Because D&A is always the same on both statements; any difference indicates an error
• C. Because the cash flow statement excludes D&A entirely
• D. Because the income statement reflects cash taxes differently

Answer: (A)

Depreciation and amortization can show up differently because they’re non-cash charges that are treated and presented differently across statements. On the income statement, D&A may be bundled into other expense lines (for example, it sits inside cost of goods sold or operating expenses), so you don’t always see a separate D&A line. The cash flow statement, however, presents D&A as a distinct adjustment when reconciling net income to cash flow from operations. That visibility lets you add back D&A to net income to arrive at cash earnings, which is also how EBITDA is typically computed. So, if D&A is embedded in other income statement items, you’d rely on the cash flow statement’s explicit D&A figure to correctly back out EBITDA or understand the cash impact, leading to differences between what appears on the income statement and what appears on the cash flow statement. The other statements aren’t accurate because D&A isn’t always identical on both statements, the cash flow statement doesn’t exclude D&A, and taxes relate to cash payments, not the non-cash D&A adjustment.