Depreciation is a cash outflow
Definition: Depreciation is a non-cash expense that allocates the cost of an asset over its useful life. The cash outflow occurred when the asset was purchased…
Reality
Depreciation is a non-cash expense that allocates the cost of an asset over its useful life. The cash outflow occurred when the asset was purchased. Depreciation reduces taxable income, creating a tax shield.
Why It MattersUnderstanding why "depreciation is a cash outflow" is a misconception helps avoid analytical errors and improper financial decision-making.
CategoryFinancial Accounting
External Links
- Depreciation — Wikipedia