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?
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depreciation as a reserve
Replies (3)
Depreciation is a provision not reserve , hence a part of current liabilities. Also it is a charge against profit. It is added in cash flow because it is a non cash expenditure.
1. First of all depreciation is not a reserve it is a provision.
2. We can not treat it as cash & cash equivalent for any company
3. Your view is wrong that it leads to increase in cash inflow. Depreciation is added because it is non cash item under operating activities. Just because of adding it we can not call it increase in cash flow.
Since deprecition is a non cass expenditure, so to get cash flow it is added in total profit acehieved by the organisation.
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