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Why Revenue and cost figure shown on income statement may not representative of actual cash flows and outflows?
Wiki User
∙ 16y ago
Financial Statements are prepared according to accrual rule of accounting keep in mind according to which cost and revenue are recorded as the occur and not when they are actually received or paid that's why cash flows in the year may be different from revenue and costs in income statements because different companies use different policies to pay the costs and collect revenues in current and subsequent years.
Wiki User
∙ 16y ago
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Why is it that the revenue and cost figures shown on a standard income statement may not be representative of the actual cash inflows and outflows that occurred during a period?
The recognition and matching principles in financial accounting call for revenues, and the costs associated with producing those revenues, to be "booked" when the revenue process is essentially complete, not necessarily when the cash is collected or bills are paid. Note that this way is not necessarily correct; it's the way accountants have chosen to do it.
Why might the revenue and cost figures shown on a standard income statement not represent the actual cash inflows and outflows that occurred during a period?
The recognition and matching principles in the financial accounting call for revenues, and the costs associated with producing those revenues, to be "booked" when the revenue process is essentially complete, not necessarily when the cash is collected or bills are paid. Note that this way is not necessarily correct; it's the way accountants have chosen to do it.
Campare between incom statement and cash flow statement?
Income statement and cash flow statement is different in this way that in income statement all incomes and expenses are shown within one fiscal year whether actual cash is paid or not while in cash flow statement only those transactions are listed due to which cash inflows or outflows from business.
What section would sales returns and allowances be on the income statement?
Sales returns and allowances reduces the actual sales value that;s why shown as deduction from Sales Revenue in Income Statement
When is revenue reconized in accurual accounting?
Revenue is recognized when it is incurred in accrual accounting while in cash based accounting revenue is recognized when actual cash is paid
Why is it that the revenue and cost figures shown on a standard income statement may not be representative of the actual cash inflows and outflows that occurred during a period?
The recognition and matching principles in financial accounting call for revenues, and the costs associated with producing those revenues, to be "booked" when the revenue process is essentially complete, not necessarily when the cash is collected or bills are paid. Note that this way is not necessarily correct; it's the way accountants have chosen to do it.
Does merchandise go on an income statement?
Yes merchandise is part of income statement and this is the actual goods sold to earn revenue for specific period of company.
Why might the revenue and cost figures shown on a standard income statement not represent the actual cash inflows and outflows that occurred during a period?
The recognition and matching principles in the financial accounting call for revenues, and the costs associated with producing those revenues, to be "booked" when the revenue process is essentially complete, not necessarily when the cash is collected or bills are paid. Note that this way is not necessarily correct; it's the way accountants have chosen to do it.
Campare between incom statement and cash flow statement?
Income statement and cash flow statement is different in this way that in income statement all incomes and expenses are shown within one fiscal year whether actual cash is paid or not while in cash flow statement only those transactions are listed due to which cash inflows or outflows from business.
Do accruals go in the income statement?
It depends on transactions all receivables and payable are part of balance sheet while actual revenue or expense in part of income statement.
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!
What section would sales returns and allowances be on the income statement?
Sales returns and allowances reduces the actual sales value that;s why shown as deduction from Sales Revenue in Income Statement
What is a budgeted cashflow statement?
Operating cash flows shows the overall cash inflows and outflows which initiate completely due to operating activities of business like receipts from debtors or payment to creditors etc.
A revenue variance is unfavorable if the actual revenue is less than what the revenue should have been for the actual level of activity for the period true or false?
TRUE
How do you calculate Total revenue variance?
total revenue variance = actual revenue - standard revenue Total revenue variance (AQ x AP) - (SQ x SP) where AQ is actual quantity (units of service sold), AP is actual price (actually recorded as revenue), SQ is standard quantity, and SP is standard price
What was the actual NASCAR revenue in 2010?
500 million
The activity variance for revenue is unfavorable if the actual revenue for the period is less than the revenue in the static planning budget true or false?
true
