What it is:
How it works (Example):
Depreciation and amortization are the two most common examples of noncash items. They are a standard feature of income statements, whose purpose is to account for all of a company’s expenses in a given period. Though the company’s assets do lose value over time (hence the need to record depreciation), the company does not actually write a check to “Depreciation.” It is just an entry to reflect the reduction in the value of the company’s assets.