Depreciation as a reserve

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piyush kr. singh (Querist)
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09 April 2017 Is depreciation a reserve? Can we treat it as cash & cash equivalent for any company or firm? Because it is added in operating activities in cash flow statement.& Ultimate leads to increase in cash inflow? Please couldsomeone guide me regarding this matter?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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10 April 2017 Depreciation is not a reserve. It is depletion in value of capital asset due to wear and tear due to efflux of time or of usage. Even though depreciation is charged as expenses no Cash payment is required hence added back to operating activity.

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piyush kr. singh

piyush kr. singh (Querist)
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11 April 2017 thanks sir, but ultimately when it is added to operating activities, it increases our cash flow. So Where is that portion of cashflow reflecting in our books of accounts?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 April 2017 Depreciation is a non cash expense it is reflected in sales realisation.

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