What are some examples of a noncash expense?
Typically, an expense means that the company had a cash outflow. However, for noncash expenses, there is no cash outflow.
Some common examples include depreciation & amortization and stock-based compensation. As you can see in the examples below, when we record depreciation or stock-based compensation, there is no cash outflow at the time or in the future (i.e. a payable is not recorded).
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You might also be interested in... Why is depreciation and amortization expense considered a non-cash expense?
Depreciation and amortization are considered to be a non-cash expense because the company does not have an actual cash outflow for those expense. Depreciation and amortization are recorded to reduce the taxable income for a company. As you can see below, there is no cash outflow when depreciation expense is recorded.
Why is stock based compensation expense considered a non-cash expense?
When a company records stock-based compensation expense, there isn’t an actual cash outflow. As you can see in the journal entry below, the company doesn’t actually credit cash to fund the stock option expense. Instead, the company funds the stock option expense by issuing more common stock. An example of another type of non-cash expense...
What is the difference between EBITDA and EBIT?
The only difference between these two terms is that for EBITDA, you would add back depreciation and amortization since it’s a non-cash expense. In EBIT, you do not add back depreciation and amortization (they burden EBIT).
Why is depreciation and amortization expense considered a non-cash expense?
Depreciation and amortization are considered to be a non-cash expense because the company does not have an actual cash outflow for those expense. Depreciation and amortization are recorded to reduce the taxable income for a company. As you can see below, there is no cash outflow when depreciation expense is recorded.
Why is stock based compensation expense considered a non-cash expense?
When a company records stock-based compensation expense, there isn’t an actual cash outflow. As you can see in the journal entry below, the company doesn’t actually credit cash to fund the stock option expense. Instead, the company funds the stock option expense by issuing more common stock. An example of another type of non-cash expense...
What is the difference between EBITDA and EBIT?
The only difference between these two terms is that for EBITDA, you would add back depreciation and amortization since it’s a non-cash expense. In EBIT, you do not add back depreciation and amortization (they burden EBIT).
