Which of the following is a non-cash expense?

• A. Depreciation.
• B. Wages paid.
• C. Interest paid.
• D. Tax expense.

Answer: (A)

Non-cash expenses are costs charged to the income statement that don’t involve an actual cash outflow in the period. Depreciation fits this, because it allocates the cost of a long-term asset over its useful life and is recorded as an expense, yet no cash is paid when depreciation is recognized each year. The cash outlay happened when the asset was purchased, not when the depreciation is recorded. This lowers reported profit without reducing cash in hand. In contrast, wages paid and interest paid involve real cash payments in the period, and tax expense usually reflects taxes owed or paid (the cash effect occurs when those taxes are settled). So depreciation is the non-cash expense.