Accounting / July 19, 2018 / Ariyah Lang
In order to fully comprehend the concept of sales and receipts, you must have a knowledge of accrual accounting. With accrual accounting, sales are posted to the business' books when the merchandise or service is delivered and the customer invoiced. This is completely independent of when the customer pays the bill. Accrual accounting allows for more accurate financial statements, because the expenses and income are more closely matched to when they actually occurred.
The cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. A cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.
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