What is a Non-Cash Adjustment known as?

A non-cash adjustment is an entry in a restaurant's books that affects reported numbers without any actual cash. It shows up on paper, but no money is moved.

Depreciation: One common example is Depreciation. When a restaurant records $1,000 in depreciation on a piece of equipment, that reduces reported profit for the period. The equipment was already paid for; this is just spreading that cost out over time on paper.

Other examples include inventory write-offs for spoiled food, adjustments for gift card breakage, or accounting for bad debt, all of which are not collected. These things affect the numbers on a financial statement without a matching cash transaction happening at the same time.

Understanding non-cash adjustments matters because profit and actual cash in the bank aren't always the same. A restaurant could show a lower profit because of a big depreciation adjustment, while still having plenty of cash on hand. This is part of why a cash flow statement gets looked at separately from a profit and loss statement.