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In calculating profit we use accrual basis of accounting, there are many item which recognized in the statments but they are not acctually paid in cash term. Like depreciation and provision. deffered tax and interest received. these are the all thing which affect our profit but they are not actually received or paid by the organization.
You can see that organization calculate their tax on profits but they may have not paid their tax after1 month of statement preparations. This can affect the cash
In cashflow we just consider the inflow and outflow of the cash, we follow the cash basis.
