Non-cash items, a term primarily associated with banking, define negotiable instruments or items of value which are exchanged without the use of physical cash. In banking, these items can range from instruments such as checks which can be easily verified by a bank, to those which are harder to authenticate such as wire transfers. When a customer deposits non-cash items into their account, the bank will check to see if the depositor is legitimate and the instrument is in good standing. The funds can only be credited to the depositor’s account after this process is complete.

In terms of accounting, non-cash items represent expenses which are documented on the income statement, yet do not require a physical payment of money to settle. Examples of non-cash items include capital depreciation, investment gains, losses, and equity. As these items are not reflected in the general ledger, the corresponding amounts are simply noted on the income statement itself. This distinction is often highlighted through the use of ‘non-cash’ preceding the item.

Non-cash items are important accounting tools, as they assist in providing investors, lenders and economic organizations with meaningful indicators of sustainability and economic performance. By allowing for a truer comparison of a business’s profits and cash flow, those viewing the financials may be able to gain a more accurate understanding of the firm in relation to the industry.

For the business itself, non-cash items, when tracked and monitored properly, provide important indicators of possible new investments, or provide a tighter grip on the expenses associated with maintaining their assets.

It is also important to note that while non-cash items are not recorded directly on the cash flow statement, they still need to be considered. The cash flows associated with these non-cash activities will still need to be identified, although they are not recorded in the cash flow statement.

In conclusion, non-cash items are valuable tools in the banking and accounting spheres. These items provide a truer understanding of the economic health of a business, and provide organizations with a method of tracking investment gains and losses. The proper tracking of non-cash items can also help a business ascertain the maximum value from their investments, and provide financiers with a more accurate picture of sustainability and economic performance.