Business People Club

Depreciation reporting

0 like 0 dislike
316 views
in Articles - SleepyFledgling
In an accountant's reporting systems, depreciation of a business's fixed assets such as its buildings, equipment, computers, etc. is not recorded as a cash outlay. When an accountant measures profit on the accrual basis of accounting, he or she counts depreciation as an expense. Buildings, machinery, tools, vehicles and furniture all have a limited useful life. All fixed assets, except for actual land, have a limited lifetime of usefulness to a business. Depreciation is the method of accounting that allocates the total cost of fixed assets to each year of their use in helping the business generate revenue.

Part of the total sales revenue of a business includes recover of cost invested in its fixed assets. In a real sense a business sells some of its fixed assets in the sales prices that it charges it customers. For example, when you go to a grocery store, a small portion of the price you pay for eggs or bread goes toward the cost of the buildings, the machinery, bread ovens, etc. Each reporting period, a business recoups part of the cost invested in its fixed assets.

It's not enough for the accountant to add back depreciation for the year to bottom-line profit. The changes in other assets, as well as the changes in liabilities, also affect cash flow from profit. The competent accountant will factor in all the changes that determine cash flow from profit. Depreciation is only one of many adjustments to the net income of a business to determine cash flow from operating activities. Amortization of intangible assets is another expense that is recorded against a business's assets for year. It's different in that it doesn't require cash outlay in the year being charged with the expense. That occurred when the business invested in those tangible assets.

Please log in or register to reply to this post.

Related posts

0 like 0 dislike
0 comments 281 views
0 like 0 dislike
0 comments 1,247 views
0 like 0 dislike
0 comments 338 views
0 like 0 dislike
0 comments 318 views
0 like 0 dislike
0 comments 299 views
0 like 0 dislike
0 comments 306 views
0 like 0 dislike
0 comments 333 views
0 like 0 dislike
0 comments 319 views
0 like 0 dislike
0 comments 311 views
0 like 0 dislike
0 comments 293 views
0 like 0 dislike
0 comments 291 views
0 like 0 dislike
0 comments 298 views
0 like 0 dislike
0 comments 321 views
0 like 0 dislike
0 comments 297 views
0 like 0 dislike
0 comments 269 views
0 like 0 dislike
0 comments 313 views
0 like 0 dislike
0 comments 304 views
0 like 0 dislike
0 comments 303 views
0 like 0 dislike
0 comments 271 views
0 like 0 dislike
0 comments 291 views
0 like 0 dislike
0 comments 264 views
0 like 0 dislike
0 comments 312 views
0 like 0 dislike
0 comments 243 views
0 like 0 dislike
0 comments 239 views
0 like 0 dislike
0 comments 255 views
0 like 0 dislike
0 comments 251 views
0 like 0 dislike
0 comments 204 views
0 like 0 dislike
0 comments 237 views
0 like 0 dislike
0 comments 205 views
0 like 0 dislike
0 comments 206 views
0 like 0 dislike
0 comments 249 views
0 like 0 dislike
0 comments 245 views
0 like 0 dislike
0 comments 200 views
0 like 0 dislike
0 comments 251 views
0 like 0 dislike
0 comments 240 views
0 like 0 dislike
0 comments 217 views
0 like 0 dislike
0 comments 212 views
0 like 0 dislike
0 comments 246 views
Connect with us:
...