What is the difference between a cash flow statement and an income statement?

@liam 

The main difference between a cash flow statement and an income statement lies in the information they present and the ways they measure a company's financial performance.

1. Information Presented:

• Cash Flow Statement: It provides details about the inflows and outflows of cash during a specific period. It showcases how cash is generated and used in the business, focusing on operating, investing, and financing activities.
• Income Statement: Also known as a profit and loss statement, it presents the revenues, expenses, gains, and losses of a company during a specific period. It shows the company's profitability by determining the net income or net loss.

1. Timing:

• Cash Flow Statement: It analyzes cash inflows and outflows over a specific period, giving a more immediate indication of a company's cash position.
• Income Statement: It presents revenues and expenses earned or incurred during a specific period, regardless of the actual receipt or payment of cash.

1. Focus:

• Cash Flow Statement: It focuses on the liquidity and solvency of a company, highlighting its ability to generate cash and meet financial obligations in the short term.
• Income Statement: It focuses on the profitability of a company, measuring the financial performance in terms of revenue and expenses.

1. Accrual Basis vs. Cash Basis:

• Cash Flow Statement: It utilizes the cash basis of accounting, where transactions are recorded when cash is received or paid.
• Income Statement: It follows the accrual basis of accounting, recognizing revenues when earned and expenses when incurred, irrespective of cash flow.

In summary, a cash flow statement provides information regarding the movement of cash, emphasizing liquidity, while an income statement focuses on profitability by presenting revenue and expenses, considering the timing of accrual-based accounting.