Abstract: The profit and loss account shows whether a company is operating or not, as far as obtaining a positive result out of its activity is concerned, but does not allow the provision of information related to actual flows conferring trust from non-specialists point of view: entry and exit of cash availabilities as a result of the activity development.
The result contoured by the profit and loss account relies on standardized principles and methods, on conventions originating from the accrual accounting and therefore, we can face one case in which two companies with the same availabilities and similar employment thereof, may obtain different results, because of various methods of evaluation of revenues and charges.
The variety and complexity of issues related to the good management of the company's treasury create a wide field of analysis and debate for specialists in the field, especially because this topic practically relates to the activities conducted by all economic agents. Most of the users of accounting information are interested in the fluidity of the company's business and especially in its ability to provide a suitable rotation speed for liquidities.
The accounting information provided by accrual accounting and focused mainly on profit is unable to provide a suitable response to such request.
This is how the need to operate the accounting information is necessary, which provides the treasury flow knowledge as correspondent of patrimonial flow transiting the company and with immediate impact on liquidities.
The cash flow statement discloses the flow statement which, as a difference from the profit and loss account, provides a projection over the actual possibilities of the company to financially support and face the payment of debts with actually available resources and not with future resources.
Publication Year: 2009
Publication Date: 2009-09-03
Language: en
Type: article
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