Thursday, January 1, 2015

Why might the revenue and cost figures shown on a standard income statement not be representative of the actual cash inflows and outflows that occurred during a period?

Why might the revenue and cost figures shown on a standard income statement not be representative of the actual cash inflows and outflows that occurred during a period?
The Income Statement deals only with revenues and expenses.

The Cash Flow Statement includes any form of cash flow, be it revenues, expenses, the sale or purchase of assets, payment or proceeds from liabilities, etc etc..

Hence the income statement does not provide a complete picture of the entity's cash activities.

Does this make sense? If it doesn't, drop me a line :) Happy study!

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