06-18-2009, 06:27 PM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by umairansari</i>
<br />Why depreciation is considered as non-cash item and comes under the heading of operating expenses in Income Statement?
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Hi there,
Depreciation is considered as non cash item for a simple reason. Look when u purchase some asset like plant cash outflows for the whole of cost is shown in the investing activities and therewhy you can not show cash outflows for the same thing twice i.e. one at time of purchase and the other when it is charged to income statement. The indirect format of cash flow statement requires to adjust all the non cash items charged to income statemet for appearing at actual cash flows from operations. I hope this answer your question.
<br />Why depreciation is considered as non-cash item and comes under the heading of operating expenses in Income Statement?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Hi there,
Depreciation is considered as non cash item for a simple reason. Look when u purchase some asset like plant cash outflows for the whole of cost is shown in the investing activities and therewhy you can not show cash outflows for the same thing twice i.e. one at time of purchase and the other when it is charged to income statement. The indirect format of cash flow statement requires to adjust all the non cash items charged to income statemet for appearing at actual cash flows from operations. I hope this answer your question.
