cash flow

Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

cash flow

Postby chandniwadhwani92 » Tue Nov 18, 2014 6:03 am


when revenue( sales) exceeds cash collection firm sold item on credit and account receivable( an asset) increase. The opposite occurs when customer repay more on outstanding account than the firm extends new credit,cash collection exceed revenue and account receivable decreases. when purchase from supplies exceed cash payments, account payable (liability) increase. when cash payment exceed purchase payable decreases

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Finance Junkie
Posts: 981
Joined: Wed Apr 09, 2014 6:28 am

cash flow

Postby edupristine » Tue Nov 18, 2014 12:15 pm

- Sometimes when company provides easy credit terms to increase their their sales.
Affect:- Revenue increases( Income statement )
Accounts receivables increases( Balance sheet )
Both will affect (cash flow statement) items accordingly.
And when company uses difficult credit terms opposite affect will replicate.

- When company start purchasing on credit.
Affect:- Purchase increases(Income statement).
Accounts payable increases(Balance sheet).
And both will affect the cash flow statement entries as follows.

Double entry book keeping always ensures an one entry will impact 2 accounts.

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