Answered: reason that depreciation is a source of…

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reason that depreciation is a source of cash inflow is because

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4MC: Which of the following statements about capitalizing costs is correct? A. Capitalizing costs refers...

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

⦁ The reason that depreciation is a source of cash inflow is because
A. it is a tax-deductible non-cash expense.
B. it supplies cash for future asset purchases.
C. it is a tax-deductible cash expense.
D. it is a taxable expense.

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

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