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About the statement of cash flow in accounting, please help me to understand.?


I can not understand the following reasons:
Depreciation expense, Loss on sale of equipment should be added to income statement and gain on sale of asset should be deducted in cash flow from operating activities..........
I keep thinking it should be opposite.

Any one can explain me clearly?

538 day(s) ago

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EchoMan 		The reason is because a cash flow statement begins with Net Income, then reverses out income and expense items not involving a CASH movement.

Since Depreciation and gains/losses on equip sales are non-cash items (they do not require cash) on the income statement, then:

Depreciation and loss on sale of equip are both added back to net income because they were originally deductions from income. So, in order to eliminate their effect for cash flow purposes, they need to be reversed or added back to net income.

The opposite is true for a gain on sale of equipment (since it was originally added to income, it must now be deducted.

Posted 538 days ago

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BruinCPA 		All of these items are book values. Businesses are estimating the worth of their items. Depreciation is value written off for bookkeeping purposes, it is not a bill that has to be paid with funds.

Depreciation is an attempt to spread the cost of the item over several months/years that the item is used.

Do not view depreciation as an expense that is taking money out of the business.

Loss/Gain on sale of equipment is just adjusting the difference between what has been written off through depreciation, and the actual dollar amount received from the company liquidating the equipment.

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Question Title About the statement of cash flow in accounting, please help me to understand.?
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