Question

A statement of cash flows is different than a balance sheet or an income statement because it does not reflect the amount of incoming and outgoing transactions that have been recorded ________.

Answer 1

on credit.

Step-by-step explanation:

A company's cash flow statement does not show the company's net income, since it only recognizes cash sales and cash expenses, while it ignores sales on credit and expenses on credit, e.g. accounts receivable and accounts payable.

Depending on the industry that the company operates in, this may result in huge differences, e.g. a car dealer that sells through its own system of car loans vs. a retail store that sells everything on cash or through credit card payments.

The main purpose of a cash statement is to show how well a company manages its cash position.