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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09-03-2020
Business

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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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damifola728 damifola728 · Answer 1 · 2020-03-13T06:28:29+01:00

Answer:

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.