All 34 Cash Budgeting questions
More in Cash Budgeting
What is a cash budget? Why can a profitable business run out of cash? What are typical cash inflows and outflows in a cash budget? What is the difference between a cash budget and a budgeted cash flow statement? Why is the opening cash balance important in a cash budget? What is the difference between cash flow and profit? What is a receipts and payments budget? Why do lenders and investors often ask for a cash budget? What is a cash surplus and cash deficit in the context of a cash budget? How do you calculate cash receipts from credit sales?
Advertisement
Back to results for “Cash Budgeting”
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?

The Master Budget Types of Budgets Cash Budgeting
All 34 Cash Budgeting questions