How can depreciation be a cash flow????

Question

and if not why not???

Answer 1

Depreciation is not a cash flow, that's why you adjust for it in your cash flow statement. Profit before tax is calculated AFTER deducting depreciation expense, so when you commence your cash flow statement with profit before tax, you have to adjust for it by adding back depreciation to the profit figure. The cash flow is taken care of when you bought the asset, when it was a cash outflow under investing activities.

Answer 2

It isn't but it goes on the statement of cash flows to reconcile the profit or loss to the change in financial position. Many things do like the repayment of principal on a loan isn't an expense but effects cash. Depreciation is an expense but doesn't cost cash.

Answer 3

Depreciation is an item the government let's you deduct with a
monetary value that allows the net income to be less. Some
people (I'm not one of them) feel that since this allows the business to pay less in taxes, meaning you have more money
left over - that it is to be considered 'cashflow'.

I define 'cashflow' as that part of net income that does not have to be used for the payment of anything And can be used
for the expansion of the business And will not put the company
into jepardy if used.

Answer 4

tax write off