What are different types of cash flow accounting?

cash flow accounting is a focus on the method of accounting of cash bases and statements of cash flows. The statement of cash flows is part of the acrual accounting method, which does not exactly follow the movements of cash. According to the statement of cash flows, the company can prepare this information according to direct or indirect methods. Although both are acceptable, the direct method states all income and payments from the company's operation. The indirect method regulates net income for items that are related to non -industrial accounting rules. This system is more common when the company is small and does not report information about external stakeholders. For example, the owner of a small company needs 200 yards to make clothing. The purchase only records when they pay for the material within this accounting system of cash flows. If his supplier gives him 10 Days to pay the account, the company owner records the purchase in his accounting book when he writes the supplier check.The entry records an increased inventory and reduces cash.

The same process works when selling clothing made of material. When the customer pays the owner of a small company for the shirt, the owner records debit for cash and loan for sales sales, with both sides of the entrance to the diary increasing these accounts. Although it is simple and usually easy to use, this process of cash flow accounting is often not for larger organizations or publicly held companies. The reason is that the money base method creates an uneven historical record of financial transactions. The parties are unable to accurately check the financial stability of the company and cannot make well -informed decisions.

For companies that do not use standard cash tok -essential accounting, the company must prepare a statement of cash flows. This statement aligns recorded financial transactions with actual movements hotOperation in the company's operation. Companies prefer direct method because information for this method is easily available. In the operating part of the statement, the company must total all income and deduct all cash expenses. According to the indirect method, which is preferred by a majority of national accounting standards-it starts with a net income and adds back all the items that represent cashless activities. When using this command, companies using the accrual accounting method may show their transactions similarly to accounting of cash flows.