Non-Cash Adjustments to Reconcile Net Income

Definition of Non-Cash Adjustments to Reconcile Net Income

The first adjustments made to the net income balance involve non-cash transactions that have increased or decreased the amount of net income or loss reported by the entity during the financial reporting period. The most common non-cash transaction to be adjusted involves depreciation expense or amortization. Depreciation or amortization expense occurs when the value of an owned asset is reduced to reflect a write-down in the remaining useful life of that asset. Since no cash has been actually exchanged, the amount of depreciation or amortization expense must be added back to the amount of net income or loss reported by the entity.

Non-Cash Adjustments to Reconcile Net Income Details