How the Balance Sheet and Cash Flow Statement Differ?
Join TheConstructor to ask questions, answer questions, write articles, and connect with other people. When you join you get additional benefits.
Log in to TheConstructor to ask questions, answer people’s questions, write articles & connect with other people. When you join you get additional benefits.
Lost your password? Please enter your email address. You will receive a link and will create a new password via email.
How the Balance Sheet and Cash Flow Statement Differ?
AdityaBhandakkar
Hi,
The profit and loss account and cash flow statement are introductory presentations of the company’s activities. And they are straightforward to understand.
a) Profit and loss statement: All you need to remember is that whatever income is received by the company is written on credit (right) side. Whatever expense is incurred by the company is written on the debit (left) side of the statement. The key figures on the right side to focus are sales revenue and any other income the organization has earned during that period. It is essential to observe the primary sources of payment for the company. Naturally, on a bank’s P&L account, it would be mainly interest received from loans and advances, and investments. For a manufacturing organization, it should be sales proceeds from its products and other ancillary services. Similarly, the debit (left) side shows the expenses/losses incurred by the organization during that period. You may focus on a particular kind of payments like personnel cost, cost of materials, advertising and marketing expenditure, etc.
b) Cashflow statement is slightly more technical in its composition than profit and loss account. It consists of mainly 3 parts: 1) Operating activities (core business activities), 2) Investing activities representing investments made by the company, and 3) Financing activities representing the capital structure of the company. Consider this. Walmart sells wares on its online portal. But it needs money to run its operations. So, say it raises $ 1 million from some source. Now, it invests $ 0.5 million from the amount in building the online infrastructure and logistics network and uses $ 0.5 million in the routine operations of the firm. > 1 million raised will be a part of financing activities in CFS. > o.5 million used in advertisement will be a part of investing activities in CFS. > 0.5 million used in daily operations will be a part of operating activities in CFS.
Soumyadeep Halder
How the Balance Sheet and Cash Flow Statement Differ?
A balance sheet is a summary of the financial balances of a company, while a cash flow statement shows how the changes in the balance sheet accounts–and income on the income statement–affect a company’s cash position. In other words, a company’s cash flow statement measures the flow of cash in and out of a business, while a company’s balance sheet measures its assets, liabilities, and owners’ equity.
Balance Sheet, on the other hand, is the statement which reveals the overall financial strength of the concern by showing the balances of assets, liabilities, and capital of the enterprise at a given date. In this article, we have discussed some noteworthy differences between Balance Sheet and Cash Flow Statement.
Cash flow Statement is as important as the other two parts (Profit & Loss Account and Balance Sheet) of the accounting information furnished in the form of financial statements at the end of the financial year. It is the statement which describes the flow of cash and cash equivalents in and out the organization. The statement is helpful to the stakeholders or say interested parties, in learning about the sources and uses of the company’s cash during a particular financial year, from different activities.
Key Differences between Balance Sheet and Cash Flow Statement
Comparison Table Between Balance Sheet and Cash Flow Statement (in Tabular Form)
Abbas Khan Civil Engineer
 Balance Sheet: Balance Sheet is define as ” It is simply a list of business’s assets and liabilities at a given date and time”.
Balance sheet ia prepaared annually in most cases.It shows whether a business is going well or in a loss. If assests are greater than the liabilities of a any construction company’s, it is in profit mood. If liabilities are more than assets, the company is in loss or maybe going in loss.
Cash Flow Statement: Cash Flow is basically ” The incoming and outgoing of a money from a company’s account is called Cash flow statement”
So, Cash flow statement has two types
1- Positive Cashflow: When there is a more inflow of a money and less outflow in a company’s account. It is a good for the company as it is easy for it to pay salaries to engineers, labours and other employees.
2- Negative Cashflow: When there is less inflow and more outflow of a money in a company’s account. It may cause a great trouble for a company as company’s assets are decreasing day by day. It may unable to to continue construction activites and procurement of materials for project completion.
aviratdhodare
Komal Bhandakkar
The basic difference between the balance sheet & cash flow statement are listed below;
nikeetasharma
A balance sheet is the summary of the financial balances of a company, while a cash flow statement shows how the changes in the balance sheet accounts – and income on the income statement – affect a companys cash position.