ACC 333 Lecture Notes - Lecture 12: Operating Cash Flow, Cash Flow, Income Statement
3 Jan 2018
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Survive, grow, become profitable, generate positive net cash flow. The core underlying difference between the two methods is in the timing of transaction recordation. When aggregated over time, the results of the two methods are approximately the same. Cash basis: revenue is recorded when cash is received from customers, and expenses are recorded when cash is paid to suppliers and employees - when cash is received. Accrual basis: revenue is recorded when earned and expenses are recorded when consumed - when transaction is issued. A company sells ,000 of green t-shirts to a customer in march, which pays the invoice in april. Under the cash basis, the seller recognizes the sale in april, when the cash is received. Under the accrual basis, the seller recognizes the sale in march, when it issues the invoice. Resource (asset) -> 28394$, quickly, without material discount or loss of value.
