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Explain why depreciation is shown as an adjustment to cash i

Property, plant and equipment generally represent a material portion of the total assets of most companies. Accounting for the acquisition and usage of such assets is, therefore, an important part of the financial report process.

Distinguish between revenue and capital expenditures and explain why this distinction is important.

Briefly define depreciation as used in accounting.

Identify the factors that are relevant in determining the annual depreciation and explain whether these factors are determined objectively or whether they are based on judgment.

Explain why depreciation is shown as an adjustment to cash in the operations section on the statement of cash flows.

Your answer is 284 words in everyday language suitable for a novice.

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Your answer is 284 words.

Revenue expenditure (expense) is one that is "used up" and not expected to benefit future periods. Capital expenditures are not used up in the current period and are expected to benefit future periods. This distinction is important because measurement of profit is dependent on the proper matching of what assets were used in the period. If the asset is not used up, it should not reduce that period's profits.

Depreciation in ...

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Your answer is 284 words in everyday language suitable for a novice.

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