U1 AOS 2: Revision Cash vs Profit Flashcards
(14 cards)
What is the primary difference between cash and profit?
Cash refers to the actual money available, while profit is the revenue remaining after all expenses have been deducted.
True or False: Profit can exist without cash flow.
True.
Fill in the blank: Cash accounting recognizes revenue when it is _______.
received.
Which accounting method records revenues and expenses when they are incurred, regardless of cash flow?
Accrual accounting.
What financial statement primarily reflects cash flow?
Cash flow statement.
What is the primary purpose of an Income Statement?
To show a company’s revenues and expenses over a specific period, resulting in net profit or loss.
True or False: The Cash Flow Statement provides details on cash inflows and outflows from operating, investing, and financing activities.
True
Which financial statement would you use to assess a company’s liquidity?
Cash Flow Statement
Multiple Choice: Which of the following is NOT included in the Income Statement? A) Revenue B) Net Income C) Cash Flows D) Expenses
C) Cash Flows
What is net profit?
Net profit is the amount of money a business has left after all expenses, taxes, and costs have been subtracted from total revenue.
True or False: A business can be profitable on paper but still experience cash flow issues.
True
Fill in the blank: A business may have a cash deficit due to __________, even if it shows a net profit.
delayed payments from customers
What financial statement typically shows net profit?
The income statement
How can accounts receivable impact cash flow despite showing net profit?
If a business has high accounts receivable, it may not have received cash yet, leading to cash flow deficits.
