answersLogoWhite

0

Depreciation expense has no affect on cash flows whatsoever. It is simply a method of systematically expensing a long-term tangible asset over its useful life.

However, if you are trying to calculate your cash flows from operating activities using the indirect method, depreciation expense is one of the figures you would add to your net income in order to arrive at that number.

User Avatar

Wiki User

14y ago

What else can I help you with?

Related Questions

Does a depreciation expense increase or decrease cash flow?

Neither. Depreciation is a non-cash expense.


Is depreciation expenses a non-cash expense?

is depreciation expense a non-cash expense


The cash flow from depreciation can be described as?

Depreciation does not create cash flow. It is a non-cash expense.


What effect does depreciation expense have on net income and cash flow?

Depreciation Expense reduces net income and has no effect on cash flow.


What does it mean to say that depreciation expense does not affect cash?

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.


How does cash flow accounting handle depreciation?

Depreciation is a non-cash expense that matches the income generated by an asset or its useful life. When creating a statement of cash flows depreciation expense is the first item added back in.


Is depreciation expense part of a cash budget?

yes


How does depreciation affect?

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.


Why depreciation expense is not included in the cash flow statement?

Depreciation Expense, though called an expense, is not an expense where the company actually pays money out. The statement of cash flows deals with the company's "cash flow" in order for a manager to see where the company's cash is going to and coming from. Since depreciation expense doesn't involve actual cash flow, it would not affect the Cash account.


How does depreciation affect cashflow?

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.


Does amortization have a cash expense?

No amortization is done for intangible assets like depreciation for tangible assets and it also does not involve cash expense.


How does an increased depreciation expense affect tax-related cash flows?

The depreciation deduction increases the amount of after tax cash (working capital) available to the business. The additional cash is equal to the amount of tax that would otherwise be payable on the depreciation claimed. This is because depreciation is an "unfunded" expense, but is really a tax deferral which is subject to recapture in the future.