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Budgeting & Forecasting › Cash Budgeting

Why are non-cash items like depreciation excluded from the cash budget?

Beginner

Answer

Depreciation, amortization, and provisions are accounting allocations that don't involve cash movement, so they don't belong in a cash budget, which records only actual cash flows. Including them would misstate the cash position. (The cash cost of the asset appears when it's purchased, not as depreciation.)
Real-world example Depreciation reduces profit but never appears in the cash budget because no cash moves.

Common follow-ups: When does the asset's cash cost appear? | What other non-cash items are excluded?

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All 34 Cash Budgeting questions