Is depreciation subtracted while calculating net income

Sir Whether in calculating net income we will deduct non operarting expense like depreciation etc. also

4 Answer(s)


Yes, you will deduct non-operating expenses (such as interest, tax) etc while calculating net income.

However, depreciation is an operating expense - depreciation is due to the capital expenditure incurred towards the business core operations.

Interest and Tax however are not related to the core product/service of the company and hence are not considered as operating income.


Depreciation is an expense incurred due to assets on your balance sheet. Any asset is used for the operations of the company and hence it is an operating expense. Moreover assets are used to produce revenue and the portion of assets that are used to generate the revenue is allocated as expenses based on the matching concept of accounting.

When Financial Analysts are scrutinizing financial statements they will back out/subtraact the depreciation expense in order to get to the FCF (Free Cash Flow) number.

Amortization is also treated in the same way as depreciation


thank you sir


Yes. You deduct non-operating expenses like depreciation, etc., to arrive at your net profit/income or PADIT(Profit After Depreciation, Interest and Taxes).