A lot of the arguments concerning the relationship between depreciation and "funds" are due to definitional rather than substantive differences. This article attempts to clarify some major sources of either misconception or trouble that arise in discussions concerning fund statements. Some people wish to use the word "funds" in such a way as to include not only ready cash but also all the classifications included in net working capital, while others use the terms funds and cash as synonymous. There are cases, however, where the difficulty is caused by erroneous assumptions. One of such assumptions is that the undepreciated cost of assets sold is not a source of funds. The author shows that depreciation does not generate funds at the point of sale, no matter how "funds" are defined. However, at the point of production, depreciation generates working capital if it is incorporated into the inventorial product. Since most of the confusion involves issues associated with depreciation, it suggests that a definition of "funds" limited to "cash and cash equivalent" will eliminate a lot of the temptation to elevate mechanics to the status of principles.

The article discusses the benefits of the statistical attributes of group depreciation. It has been argued in the article that the benefits of group depreciation go far beyond the bookkeeping simplification and its concomitant cost savings. Far more important are the statistical attributes of group depreciation that yield reliable information on the economic life of the assets included in the group. By means of finite Markov chains one can derive empirical probabilistic distributions of the age of the various assets, which should provide management with better data not only for asset depreciation, but also for maintenance, utilization and replacement of capital equipment. Once the transition probability-matrix is established and the initial aging of assets accomplished, data can be generated automatically for forecasts of retirements of assets, balances in the asset accounts and allowance for depreciation, as well as depreciation charges for each year over the forecasting horizon. The information generated can then be introduced and aid in the development of capital and cash budgets and forecasts.