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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Business

Mango

11 July, 03:06

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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Brennen · 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.