Non cash items? how depreciation can be a non cash item?

Question

hii there

how can depreciation be included in non cash items?

ok what if the company is not international.. what i mean to say is

, depreciation is decrease in value of currency? (am i correct here? )

if iam correct . how depreciation will be included in non cash items ..

very confused!!!!!!!!

Answer 1

the depreciation just for the fixed assets (cars, buildings, furniture...)

the amortization just for the intangible assets (Patent, goodwill...)

but if you mean inventory (when you said items), remember there are 2 types of assets we can't make a depreciation for it:

- Inventory: because you will sold it, and it's current not fixed asset.

-Land: because there is no lifetime for it, so it's will not be scrap like the car.

i hope it's the answer for your question.

Answer 2

Yes!  You are confused.

Hard cash cannot be depreciated in a business.

Not as one does on fixed assets, equipment, machinery, and fixtures.

Given, that cash can lose purchasing power, either by local currency declining in purchising power, due to inflation, or losing value against a foreign currency.

The best excample is with a gas station today.  

Here is the way that cash is increased to offset inflation, or currency devaluation against foreign currency.

Suppose that the owner purchases 1,000 gallons of gas today, @ 1.00 per gallon = $1,000.00.

Now, he sells 500 gallons.

Let's say a holiday is coming up, so he buys another 1,000 gallons tommorrow, and the price increased to $1.10 = $1,100.00.

Now, the gas is mixed in with the 500 gallons on hand.

He does not sell those 500 gallons at the lower price when purchased, then figure on selling 1,000 gallons that he purchased at the higher price.

The total inventory is priced based on the new higher cost.

In reality, you can see that the 500 gallons that was on hand when he orderd more at a higher price, is now worth, at cost, $1.10 per gallon.  So he has realized an increase in inventory of an additional $50.00 on the 500 gal.  This is sold for a higher price, but equal to the same price as the higher cost inventory.

This offsets the inflation caused by devaulation of local currency or the increased value of foreign currency.

One could, if one desired, average the cost of the two.  

Taking 500 plus 1000 gal, add the costs together and dividing by total 1,500 gallons, and arrive at a cost between $1.00 and $1.10.

This is seldom if ever done.

Now, maybe you, and others consider this to be unfair, that the owner has gained $50 on inventory already on hand at the lower cost.

This is the only way to offset the devaluation of the currency, by generating more cash when sold.

Before one screams and hollers about this, NOW REVERSE THE SCENARIO.

You can see that when the cost decreases, the owner LOSES value on existing inventory.  He has to lower the price because competition will force it.

This fits any case where merchandise of like kind is reorderd by any store.  If the same exact jeans are reordered and the cost changes, the same procedure is followed.

In one case, cash generated is more. Inflation.

In the other, cash generated is less.  Deflation.

Hope this clears up a bit.

Answer 3

depreciation is included in non cash items simply because you don't pay for it.  depreciation is merely an estimate of the future value of your asset.

for example, you bought a car for $500,000. you can't expect people to buy your car for $500,000 dollars after 5 years, right?

as for international companies, depreciation isn't a decrease in the value of currency. it is more of a foreign exchange loss, which is totally different from depreciation.