Plz answer quickly!!Why depreciation on part of the machinery sold is not added in the operating activities in cash flow statement?
Dear Student
Please note that the depreciation charged on any machinery in the current year or during the year is added in operating activity. For E.g
Suppose a machinery purchased in 2012-13, is sold on 30th Sep 2014. So for the cash flow statement of 2014-15, Depreciation on this machinery till 30th sep 2014 i.e from 01st Apr 2014 to 30th Sep 2014 shall be added in the profit under operating activities.
Usually, in the question, it is given accumulated depreciation on the machine sold, this accumulated depreciation includes the depreciation of current year also.
And the other Depreciation figure we arrive from accumulated depreciation account contains the depreciation on this machinery as well till its date of Sale.
Therefore the Depreciation which we add in operating activity included depreciation on machine sold also.
Hope this helps
Regards
Please note that the depreciation charged on any machinery in the current year or during the year is added in operating activity. For E.g
Suppose a machinery purchased in 2012-13, is sold on 30th Sep 2014. So for the cash flow statement of 2014-15, Depreciation on this machinery till 30th sep 2014 i.e from 01st Apr 2014 to 30th Sep 2014 shall be added in the profit under operating activities.
Usually, in the question, it is given accumulated depreciation on the machine sold, this accumulated depreciation includes the depreciation of current year also.
And the other Depreciation figure we arrive from accumulated depreciation account contains the depreciation on this machinery as well till its date of Sale.
Therefore the Depreciation which we add in operating activity included depreciation on machine sold also.
Hope this helps
Regards