Question

In: Accounting

Why are income statements and statement of cash flows dated similarly.

Why are income statements and statement of cash flows dated similarly.

Solutions

Expert Solution

The statement of cash flows measures the sources of a company's cash and its uses of cash over a specific time period. The income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period.

A cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one year. It captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting such as depreciation and amortization. A cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

An income statement is the most common financial statement and shows a company's revenue; total expenses, including noncash accounting such as depreciation; and profit or loss, over a period of one year. An income statement is used to determine the financial performance of a company, specifically how much revenue it made, how many expenses it paid, and the resulting profit or loss from the revenue and expenses.

That's why these both statements are dated similarly.


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