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Because we are not incurring any cash when we are providing depreciation on fixed assets. Depreciation results in the reduction of fixed assets but doesn't involve any cash outflow. That is the reason it has to be added back to the net income while calculating cash flow statement.
What else can I help you with?
Why is it not a good idea to rely on your income statement to run your business?
The income statement deducts noncash expenses, such as depreciation, even when no cash is actually flowing out of the business.
Depreciation a source of cash inflow because?
it is a tax- deductible noncash expense
Why accumulated depreciation exceed depreciation expense?
Depreciation expenses is for one specific fiscal year while accumulated depreciation is the sum of all depreciation expenses that’s why accumulated depreciation exceeds the depreciation if there is depreciation expense in prior year as well.
How are accumulated depreciation and depreciation related?
Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.
How are accumulated depreciation and depreciation expensese related?
Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.
Is depreciation expenses a non-cash expense?
is depreciation expense a non-cash expense
Is depreciation a non operating expense?
28.04.2012 depreciation is part of operating expenses Popoola
Prepaid expenses depreciation accrued expenses unearned revenues and accrued revenues are all examples of?
Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of
Is depreciation an internal source of capital?
Depreciation is regarded as a source of capital because it is a noncash expense on the Income Statement. (see "Understanding Wall Street" 5th ed. by Jefffrey B. Little & Lucien Rhodes - pg 51.)
Should depreciation expenses be reported in retained earnings?
no
Is it customary for the depreciation expense account and the accumulated depreciation account to be equal?
No. Accumulated depreciation is depreciation accumulated every year and it will only increase and won't decrease. Depreciation expenses is incurred every year.
Does EBIT include depreciation and amortization expenses?
No it doesn't include
