Question

In: Finance

Cash disbursements may include all of the following EXCEPT rent payments. short-term loan payments. tax payments....

Cash disbursements may include all of the following EXCEPT

rent payments.
short-term loan payments.
tax payments.
depreciation expense.

Solutions

Expert Solution

Solution :

Cash Disbursements is the outflow of cash to meet an expense or obligation which is due for payment.

Rent payments : Rent payments involve outflow of cash to pay rent expenses. Hence, it is a Cash Disbursement.

Short - term loan payments : Short term loan payment involve outflow of cash to meet short term loan payments due, if any. Hence, it is a Cash Disbursement.

Tax Payments : Payment of tax involves outflow of cash to meet tax expense or payments due. Hence, it is a Cash Disbursement.

Depreciation Expense : Depreciation expense is an expense that does not involve outflow of cash. It is a systematic allocation of a cost of an asset over its useful life and it treated as a reduction from the Net Income from the Income Statement.  It is not an expense which is due for payment, hence there is no outflow of cash. Thus, it is a not a Cash Disbursement.

Thus Cash Disbursements involve Rent Payments, Short Term Loan Payments, Tax Payments but not Depreciation Expense.

Thus Depreciation Expense is not a Cash Disbursement.

The Solution is Option 4 : Depreciation Expense


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