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Cash Flow Statements do not show the profitability of a business, they show either an historic view, or a prediction of the flows of cash into and out of the business. It is only a Profit and Loss Account that tells us about profitability of a business. But why is this? After all, many if not most of the features are the same. They both show income, they both show expenses. So why is not the bottom line on the Profit and Loss Account the same thing as the Net Cash Flow? The answer is quite simple, the figures included in each are similar but they are not identical. The table below gives details of the main differences between the two, showing how the main differences arise, and why profit and loss accounts and cash flows are in fact quite different financial animals. {| ! bgcolor="#CCCCCC" | ! bgcolor="#CCCCCC" | Cash Flow ! bgcolor="#CCCCCC" | Profit And Loss Account ! bgcolor="#CCCCCC" | Sales | Income from sales is entered as it is received, not before. If a credit sale is made, the income is only entered when the actual bill is paid. Sales are applied to the accounting period in which the sale occurs. So a good sold in one period on credit, is entered as a sale for that period, even though the payment may not be due until the next accounting period. ! bgcolor="#CCCCCC" | Expenses | Entered as paid. Provision is made in accounts for expenses incurred but not yet paid, these are known as accruals. ! bgcolor="#CCCCCC" | Depreciation | As depreciation is a paper accounting transaction, not involving actual expenditure, this is not shown. Depreciation is shown as a business expense. ! bgcolor="#CCCCCC" | Capital Inflows | If a business receives a further injection of capital that has not arisen from its trading activities then this is shown as a type of income. This account will only show an inflow of capital that has arisen as a result of trading activity. |}
What else can I help you with?
How to account for expenses in a business financial statement?
To account for expenses in a business financial statement, you record all the money spent on operating activities, such as salaries, rent, utilities, and supplies. These expenses are subtracted from the revenue to calculate the net income or profit of the business.
Advantages and disadvantages of trading profit and loss account?
: Profit and loss account gives the actual information about net profit or net loss of the business for an accounting period, Profit and loss account gives the actual information about indirect expenses, Profit and loss account serves to show the ratio between net profit to sales, Profit and loss account helps in showing the ratio between net profit to operating expenses, Profit and loss account helps in controlling indirect expenses
What was the income statement previously called?
The Income Statement is also called the P&L (Profit and Loss) Statement.
What is the difference between a profit and loss statement and an income statement?
A profit and loss statement shows a company's financial performance over a specific period, detailing revenue, expenses, and net profit or loss. An income statement is a broader term that can refer to the same document or a more comprehensive financial report that includes additional information about a company's operations.
What is the bank profit?
Banks profit from interest income and other charges they levy on their account holders.
What is the difference between profit and loss account and cash flow statement?
Cashflow : Only the actual cash spent / received will be entered. Credit will not be entered. Profit & loss : It is more of accrual basis, all transactions that are happening in that accounting period will be entered. Cashflow : Only the actual cash spent / received will be entered. Credit will not be entered. Profit & loss : It is more of accrual basis, all transactions that are happening in that accounting period will be entered.
What is difference between P and L statement and income and expenditure statement?
Income and expenditure account is used by not for profit companies as they are formed for not for profit basis that's why they cannot use profit and loss account.
Are profit and loss account on an income statement or balance sheet?
Profit & Loss Account is the Statement showing indirect expenses and receivable of a Company where as Balance Sheet is the Statement highlighting Assets and Liabilities of the said Company.
What is trading account and profit and loss account?
That is known as the income statement or can by IAS1 it's known as the statement of comprehensive income.
What constitute an financial statement?
balance sheet profit&loss account cash flow statement fund flow statement
Why the statement of account is important for the organization?
a statement of account is like a profit and loss account you need to include you company revenue and that could let you know what your business is up to
How do you treat income tax in a profit and loss statement?
In a Profit and Loss Account, you put income tax that you pay to the government in the third section, the appropriation account.
What is a trading profit and loss account?
That is known as the income statement or can by IAS1 it's known as the statement of comprehensive income.
What is a trading accounts?
A Trading Account is an account that shows the gross profit of or loss of a manufactures or retail buisness. Sales less than the cost of sales. This is an account similar to a traditional account.
Performance of a company is disclosed in profit and loss Account Yes-No?
yes income statement or profit and loss account is primary object of disclosing the performance of a company or enterprise
What are the example for Finance cost in profit and loss account or income statement?
Interest on Loan
Is Profit and loss appropriation account a financial statement?
Yes it is. For partnerships, their P&L account can be divided into 2 parts, the normal P&L account and also the P&L appropriation account. once profit and loss account is prepared to do some adjustment with the net profit , predecided by the management, a separate account is opened named profit and loss appropriation account. :) I LOVE JUSTIN BIEBER
