Define depreciation expense as it appears on the income statement. How does depreciation affect cash flow?

Question

Jed Adtogan · Answer

Depreciation expense is an operating expenses deducted from gross income to arrived at net income. It does not affect cash flow because when you prepare Cash Flow Stateement , net income is added .Therefore, depreciation should be added back in preparing Cash Flow Statement since this expense does not involve cash.

Prashant Nair · Answer

Depreciation is deducted from Gross profit of any business firm on the Income Statement.

Depreciation is added back to Net Income in Indirect method of Cash Flows because it is a Non-cash item and its effects should therefore be eliminated from Net income.

Khaleel Ullah · Answer

Depreciation is considered as an expense and shown on the debit side of an income statement.it doesnot effect the cash flow as it is not a real expense paid to any party but a reserve for purchase of assets after wearing out.

Ali Hammad Naeem · Answer

Depreciation expense will be treated as non-cash expense and deducted from Gross Profit.

In Cash flow statement it is added back under the Income from Operating Activities

مستخدم محذوف‎ · Answer

Depreciation is reduction in value of asset...due to usage or time. Depreciation is debited in P&L account and deducted frm Asset value in Balance Sheet..There are few methods of depreciation like

Written down value method. Straigh method. etc

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Define depreciation expense as it appears on the income statement. How does depreciation affect cash flow?

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