QUESTION 8 OF 30

Why is depreciation expense considered a non-cash expense?

This is a technical question that tests whether you are able to explain why depreciation expense is considered non-cash. The reason is that when a fixed asset is purchased, the cash outflow occurs at that time. However, depreciation expense is recognized over the useful life of the asset.

"Depreciation expense is the most common non-cash expense. The reason it is considered non-cash is because the cash outflow occurs up front when the asset is purchased. However, depreciation expense is recognized over the useful life of the asset to comply with accrual accounting principles. On the Statement of Cash Flows, depreciation expense is an add-back to net income to recognize the fact that it is non-cash."

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Fixed Asset Accountant Mock Interview

Why is depreciation expense considered a non-cash expense?

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30 Fixed Asset Accountant Interview Questions & Answers