There is no provision for depreciation in cash basis accounting because there is no actual cash involved

In cash basis accounting, transactions are recorded based on cash flow rather than when they are incurred. This means that income is recognized when cash is received, and expenses are recognized when cash is paid.

Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life, typically used in accrual accounting. In accrual accounting, even if cash has not yet been paid, businesses must record expenses related to the use of their assets, including depreciation. However, since cash basis accounting focuses solely on actual cash transactions, it does not incorporate the concept of depreciation, as this would not reflect a cash movement.

To summarize, cash basis accounting simplifies financial reporting by excluding non-cash expenses such as depreciation, as its primary focus is on actual cash flow rather than the economic value of assets. This makes it simpler for smaller businesses or individuals who do not require the detailed financial statements that accrual accounting provides.