What is the difference between income statement and cash flow statement?

Income statement represents the financial performace of an organization for a specific period. And cash flow statement represents the movements of cash and cash equivalents of an organizaion for a specific period. Both of these two statements, along with some other statements, forms the financial statement of an organization for that specific period.

Income statement use accrual base Cash flow statement use cash base

The cash flow statement, or 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, or statement of financial performance, measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period.

Income statement displays the net income of the entity for the period. Where as, Cash flow statement displays the flows of cash related transactions. Cash Flow Statement displays the entity's ability to generate cash from operation through cash from operating activities, Cash gone for the investment and cash from financing activities.

income statemnt shows profit and expenses; cash flow statement shows cash flows.

The key difference between income statement and cash flow statement is the basis that is used to prepare these statements; for the income statement it is the accrual basis whereas for cash flow concept it is mere cash basis. Income statement and cash flow statement are two types of financial statements, prepared for the purpose of conveying information about the financial performance, position and changes of a particular business entity to a wide range of stakeholders. Income statement basically produces information about the financial performance of an enterprise for a specific period, in terms of profitability. Thus, income statement basically deals with two accounting elements, i.e. income and expenses. On the other hand, cash flow statement presents the movements in financial position of a business. Therefore, it considers the changes occurred in cash and bank balances of a business during a particular period. Both of these statements need to be prepared in a manner obeying the accounting concepts and standards of a particular economy that the businesses are operating in.

The cash glide assertion, or announcement of cash flows, measures the sources of a corporation's coins and its uses of cash over a particular term. The profits assertion, or announcement of economic performance, measures a organization's financial performance, which includes revenues, expenses, profits or losses over a selected term.

 

A coins go with the flow announcement shows exactly how a whole lot money a business enterprise has acquired and what kind of it has spent, traditionally over a length of1 month. It captures the cutting-edge operating results and changes on the stability sheet, such as increases or decreases in bills receivable or bills payable, and does not encompass noncash accounting consisting of depreciation and amortization. A coins drift announcement is used to determine the fast-time period viability and liquidity of a enterprise, particularly how nicely it's miles placed to pay its payments and companies.

 

An income statement is the maximum commonplace economic declaration and suggests a business enterprise's revenue; general fees, inclusive of noncash accounting along with depreciation; and profit or loss, historically over a duration of1 month. An profits assertion is used to decide the economic overall performance of a corporation, mainly how plenty revenue it made, how many prices it paid, and the resulting income or loss from the revenue and prices.

 

The cash go with the flow declaration is connected to the income statement through net income or internet burn. The profit or burn at the earnings declaration then is used to calculate coins flow from operations. That is called the oblique method. The direct approach can also be used to prepare the coins float assertion, wherein the cash received is subtracted from the cash spent to calculate internet cash glide.

In simple words, 'Income Statement' represents business income and expenses irrespective cash flow occurred or not. Whereas 'Cash Flow Statement' shows actual cash inflows and cash outflows along with opening and closing balances of cash.

The difference between the income statement and the cash flow statement lies in their purpose, content, and focus: Purpose: Income Statement: Aims to show the financial performance of a company over a specific period. It summarizes revenue, costs, and profit or loss, providing an overview of how well the company generates income relative to its expenses. Cash Flow Statement: Aims to show the movement of cash within a company, including cash inflows and outflows. It gives insight into the company’s liquidity, or its ability to manage cash to meet financial obligations. Content: Income Statement: Includes sales revenue, cost of goods sold (COGS), gross profit, operating expenses, taxes, and ultimately, net profit or net loss. Cash Flow Statement: Contains three main sections: cash flow from operating activities, investing activities, and financing activities. It shows where cash is coming from and how it is being spent. Focus: Income Statement: Focuses on profit or loss recorded during the accounting period, regardless of whether the income or expenses were paid in cash. Cash Flow Statement: Focuses on the actual cash flow, including transactions involving cash receipts and payments. In summary, the income statement assesses profitability, while the cash flow statement gives insight into the financial health of the company based on cash movements.

Income Statement contains revenue expenses only both Accrual and Cash in nature, Cash and Non-cash items (Like Depreciation/Amortization) and eventually shows the result of the operation through Net Profit or Net Loss.

On the otherhand Statement of Cash Flows shows the flow of cash through 3 different classifications of Cash Flows - from Opertaing Activities, from Investing Activities and from Financing Activities.

Income Statement shows the performance of a company as on a specific date where is cash flow statement shows the movement of cash during a period. This period may be monthly, quarterly, Bi-annually or yearly.