Provide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.

Question

Business

Mike Summers

13 February, 13:52

Provide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.

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Jamya Chung · Answer 1

Depreciation is the allocation of the cost of capital assets over their useful life. Since capital assets are held for use in more than one accounting period.

Explanation:

Depreciation is an accounting method for allocating the cost of a tangible asset over time.

Depreciation is found on the income statement, balance sheet, and cash flow statement. It can thus have a big impact on a company's financial performance overall.

Ultimately, depreciation does not negatively affect the operating cash flow of the business.