Why depreciation is considered as non-cash item ??

[faisal_desperado]

Sorry for the interruption with regards to the respondents to the orignal post,
There have two questions been asked, i.e.
<b>Why depreciation is considered as non-cash item?</b>
Whenever Depreciation expense is claimed as an expense in the Statement of Comprehensive Income(Income Statement), it reduces profitability/operating profits/ EBIT, but it does not reduces cash outlay. (All other expenses reduce profit with a consistent change in cash , if, being paid in cash)
<b>Why depreciation expense comes under the heading of operating expenses in income statement ?</b>
It depends on the situation that under which head depreciation expense should be claimed;(Applying ABC Analysis)
If the Asset is specifically being used for production purpose then Depreciation with regards to that asset will be charged to Cost Of Production (COGS)
If Asset is used in/for administrative purpose then depreciation will be charged to admin. expense.

Differentiation of opinions with regards to different people is inevitable, however it does not mean that the intention is to discourage others.

Best Regards,