X

We Value Your Privacy

We and our partners use technology such as cookies on our site to personalise content and ads, provide social media features, and analyse our traffic. Click below to consent to the use of this technology across the web. You can change your mind and change your consent choices at anytime by returning to this site.

Update Consent
DISCOVER
×
Loading ...

Why Is Depreciation Not Included in a Cash Budget?

Accounting has several purposes in business, one of which is to measure and control the cash resources from operations. Accounting also provides procedures for other financial-related items, such as asset purchases and depreciation.

Loading ...

Defined

Depreciation is a monthly expense allowed by accounting standards to reduce the value of a company's assets. This figure is a non-cash expense, meaning the company is not actually spending cash. Therefore, depreciation does not fit into the cash budget, which tracks all real cash inflows and outflows.

Features

The cash budget helps companies estimate, plan and control the necessary expenditures needed to run an organisation. This budget typically includes information from all departments. Each department will have specific restraints for spending to ensure more cash comes in than goes out.

Considerations

Companies using a cash flow statement will find that they must add back depreciation when figuring cash flows for an accounting period. This follows the principle of not allowing non-cash expenses to create a distorted view of all cash collected by the business.

Loading ...

About the Author

Daniella Lauren has worked with eHow and various new media sites as a freelance writer since 2009. Her work covers topics in education, business, and home and garden. Daniella holds a Master of Science in elementary education and a Bachelor of Arts in history from Pensacola Christian College.

Loading ...