Question

Which of the following statements is/are a difference between a statement of cash flows and a...

Which of the following statements is/are a difference between a statement of cash flows and a statement of income?

Both S.1 and S.2 are correct.

S.2 One is measured over a period of time, the other at a point in time.

S.1 One reflects the cash basis of accounting, the other the accrual basis of accounting.

None of the other answers are correct (neither S.1 nor S.2 is correct

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Answer #1

Answer is S.1 One reflects the cash basis of accounting, the other the accrual basis of accounting

Incomes statement is based on accrual system of accounting, wherein incomes and expenses of a financial year are considered. On the other hand, cash flow statement is based on cash system of account, which only considers actual money inflows and outflows in a particular financial year.

S. 2 is incorrect becuase Both statement shows the details over a period of time. A cash flow statement shows the exact amount of a company's cash inflows and outflows over a period of time and the income statement is the most common financial statement and shows a company's revenues and total expenses, including noncash accounting, such as depreciation over a period of time.

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