Question

Non-cash items are ____ that ____ cash flow.

a. expenses; do not directly affect
b. revenues; do not directly affect
c. expenses; decrease
d. expenses; increase

Answer 1

Non-cash items are expenses that do not directly affect the cash flow, such as depreciation which reduces asset value but does not involve cash transactions.

Step-by-step explanation:

Non-cash items are expenses that do not directly affect cash flow.

These are accounting entries that represent charges against profits that are not made in cash.

For example, depreciation is a non-cash expense that reduces the value of company assets on financial statements but does not result in an immediate cash outflow.

It's important to differentiate non-cash items from actual cash expenses, as they affect the income statement and tax liability but do not impact the cash available.