Taxes, payment patterns, and reporting considerations, as well as credit sales and non-cash costs, are reasons...

Taxes, payment patterns, and reporting considerations, as well as credit sales and non-cash costs, are reasons why operating cash flows can differ from accounting profits.

True or False?

Solutions

Expert Solution

The above statment is True. Yes Operating cash flows and accounting profits can differ from each other.

Explanation: Operating cash flows are used to measure project proposal and the outcome of those projects may differ maybe based on economic, political, firms internal factors etc. Whereas accounting profits are the measure of company's historical performance which based on reporting standards which mostly follows accrual system of accounting. It maybe so but operating cash flows can be derived from historical data and accountng profits can be derived for future projects. Operating cash flows and accounting profits differ from each other on various basis that is as mentioned above in the statment taxes, payment patterns as explanied futher below:-

a.) Taxes: Operating cash flows records taxes based on current taxes but accounting profits has to account for both current taxes and deferred taxes.

b.) Payment patterns: Operating cash flows and accounting profits may differ from each other based on what was forcasted to be manner of payment and what will be in real circumstances

c.) Reporting Consideration. As mentioned earlier accounting profits are derived after following reporting standards which themselves vary on basis of countries like US GAAP for USA or IFRS for other countries.

d.) Credit sales: Operating cash flows are based on cash inflows and outflows and accounting follows accrual system of aacounting where transactions are reacorded as they are sold.

e.) Non-cash costs. Non cash costs like depreciation and amortisation are reduced from earnings for tax purposes for operating cash flows and added back while calculating cash flows because these are not cash outflows while they are are reduced from earnings for better presentaion of financial statements and not added back while deriving accounting profits.

Please Upvote.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Explain financial and non-financial factors as well as internal and external considerations.

E6-3 (Algo) Reporting Net Sales with Credit Sales, Sales Discounts, Sales Returns, and Credit Card Sales...

E6-3 (Algo) Reporting Net Sales with Credit Sales, Sales Discounts, Sales Returns, and Credit Card Sales The following transactions were selected from among those completed by Bennett Retailers in November and December: Nov. 20 Sold 20 items of merchandise to Customer B at an invoice price of $6,000 (total); terms 3/10, n/30. Nov. 25 Sold two items of merchandise to Customer C, who charged the $400 (total) sales price on her Visa credit card. Visa charges Bennett Retailers a 3...

95. Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected...

95. Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 60% in the next month, and 10% in the following month. On December 31, the accounts receivable balance includes $32,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $70,000 and $140,000, respectively. What are the expected cash receipts for February from current and past...

Sales amounted to 138 600. The ration of credit to cash sales was 3:1

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

PG. 34A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Cash sales in the amount of $4,752, ($4,400 plus 352 sales taxes) were deposited at Second...

Cash sales in the amount of $4,752, ($4,400 plus 352 sales taxes) were deposited at Second Bank: 20 tool kits, $1,700; 18 hardware sets $2,700. Date of Transaction is: Use 00/00/00 format. Journal used: xxxx Journal Journal Entry Debit - Account # , Account Name: and Amount of Entry (Use format $x,xxx.xx) Debit - Account # , Account Name: and Amount of Entry (Use format $x,xxx.xx) Debit - Account # , Account Name: and Amount of Entry (Use format $x,xxx.xx) Credit - Account # , Account Name: and Amount of...

OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers.

Schedule of Cash Collections of Accounts Receivable OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 20% pay their accounts in the month of sale, while the remaining 80% pay their accounts in the month following the month of sale. Projected sales for the next three months are as follows: October $114,000 November 143,000 December...

A company had credit sales $30,000 and cash sales of $23,000 during the month of May....

A company had credit sales $30,000 and cash sales of $23,000 during the month of May. Also during May, the company paid wages of $24,000 and utilities of $9,000. It also received payments from customers on account totaling $4,400. What was thecompany's net income for the month? A. 53,000 B. 20,000 C. 86,000 D. 23,000 Which accounts are increased by debits? A. Accounts Receivable and Utilities Expense. B. Accounts Payable and Service Revenue. C. Salaries Expense and Common Stock. D....

the cash sales and credit sales projected for sarahs kitchen are as follows: January february march...

the cash sales and credit sales projected for sarahs kitchen are as follows: January february march april may cash 17,000 19640 16200 15380 17390 credit 40,000 42000 48000 50000 49500 if collections of credit sales are 70% the first month and 30% the second month, what would be the cash receipts for march, april, and may

During the month of June, Sweet Boutique had cash sales of $219,420 and credit sales of...

During the month of June, Sweet Boutique had cash sales of $219,420 and credit sales of $153,382, both of which include the 6% sales tax that must be remitted to the state by July 15. Prepare the adjusting entry that should be recorded to fairly present the June 30 financial statements. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do...

Subjects