Depreciation reduces the net income while it does not have any effect on cash flow as it is not actually any kind of cash outflow it is merely the treatment of reduction in fixed assets over entire useful life of an asset.
Depreciation do not increase or decrease the cash as it is just the presentation of actual cost of assets through income statement actual cash was already reduced when asset was purchased.
It reduces the net income because it is an expense. Expenses are deducted from income when computing the net income. It has no effect on cash flow because when the asset depreciates, there's no money involved. The only thing involved in depreciation is the carrying value of the asset.
Neither. Depreciation is a non-cash expense.
There is no affect of depreciation on cash flow that's why in indirect method of cash flow net income is adjusted for depreciation to calculate cash flow from operating activities.
Depreciation don't have any impact on cash flow statement as there is no cash inflow or outflow due to depreciation that's why in indirect method net income is adjusted for depreciation to arrive at actual cash flow.
A sales refund will reduce income (debit to Sales Returns) and assets (credit to cash). A debit to Depreciation Expense and a credit to Accumulated Depreciation will reduce assets and net income.
Depreciation do not increase or decrease the cash as it is just the presentation of actual cost of assets through income statement actual cash was already reduced when asset was purchased.
Depreciation Expense reduces net income and has no effect on cash flow.
It reduces the net income because it is an expense. Expenses are deducted from income when computing the net income. It has no effect on cash flow because when the asset depreciates, there's no money involved. The only thing involved in depreciation is the carrying value of the asset.
Neither. Depreciation is a non-cash expense.
Depreciation is added back to net income to arrive on cash flow from operating activities because depreciation itself don't cause any inflow or outflow of cash that's why it is added back to net operating income.
There is no affect of depreciation on cash flow that's why in indirect method of cash flow net income is adjusted for depreciation to calculate cash flow from operating activities.
because whin using the composite depreciation or group depreciation method and want to sale an asets we make the cash is debt by the cash received and credit the assets by original cost and the diferrince debt accomulated depreciation , then the account of accomualted deprciation in the balance sheet will not the same as depriciation expene in the income statement
Depreciation don't have any impact on cash flow statement as there is no cash inflow or outflow due to depreciation that's why in indirect method net income is adjusted for depreciation to arrive at actual cash flow.
Indirectly. Technically it doesn't, depreciation is a non-cash expense. Depreciation expense does, however show up as a line item on the cash flows statement as an adjustment to operating income to derive net cash from operations... you add it back to income.
Indirectly. Technically it doesn't, depreciation is a non-cash expense. Depreciation expense does, however show up as a line item on the cash flows statement as an adjustment to operating income to derive net cash from operations... you add it back to income.
I assume what you are referring to is the fact that if your are using the indirect approach to complete a cash flow statement, you add back depreciation. This step makes it look like depreciation is generating cash flow for the company. The reason for adding depreciation is that when we are preparing our cash flow statement, we are reconciling net income to account for things that are not reflected or things that do not affect cash flows. If we simplify it, we can say that net income equals ( Sales - Expenses ). Depreciation is an expense that decreases our net income, but it is simply an accounting value to match expenses with revenues produced, and does not affect cash. So, since we deducted depreciation to get to net income we need to add it back when we do our cash flow statement to reconcile net income with our cash flow.