The depreciation is a tax-deductible expense but is not a cash outlay. the total number of units sold will be different for accounting income and cash flows.
A tax-deductible expense is an expense that can be legally deducted from the gross profit. This reduces your gross profit and therefore the amount of tax you need to pay. In general, the expenses necessary to run a business are very likely to be tax deductible.
All deductions are expenses, but not all expenses are considered deductions. We'll get to the point in a moment. However, deductions occur when expenses are deducted from a business owner's or individual's taxable income. This reduces the amount of tax you have to pay in a given period.
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