Depreciation Is a “Phantom” Noncash Expense
Depreciation is a noncash, tax-deductible expense and can make up a significant portion of total expenses on a company’s income statement. Depreciation expense is an allocation of the costs of an original purchase of fixed assets over the estimated useful lives of those fixed assets.
If a company acquires fixed assets (e.g., several manufacturing facilities) in 2003, it has to pay for their total cost during the same year; however, on its income statement, the expense associated with the purchase is recorded over the useful life of those assets in the form of depreciation expense, in line with the matching principle.
The depreciation expense does not depict any actual cash outflow (payment).
Where Can I Find Depreciation?
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