A revenue transaction may be recorded in a different fiscal year than the year the cash related to that revenue is received. The statement of cash flows enables users of the financial statements to determine how well a company’s income generates cash and to predict the potential of a company to generate cash in the future.Īccrual accounting creates timing differences between income statement accounts and cash. Cash flow represents the cash receipts and cash disbursements as a result of business activity. The statement of cash flows is a financial statement listing the cash inflows and cash outflows for the business for a period of time.
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