Various groups like to know more about business partners before engaging in long-term transactions. Lenders prefer to evaluate how much cash potential borrowers have, as well as how much revenue they can generate over the loan period. Customers and vendors also analyze solvency and profitability data before signing commercial agreements with partners.
Revenues
Revenue items run the gamut from investment gains to earnings from sales and vendor discounts. Investors pay attention to a firm's revenues because they want to see how much money the business is currently generating but also how much more it can reap in the future. Financial analysts call "profit potential" this ability to deliver positive results over a long period in a sustainable way. Accountants report revenues in a corporate income statement.
Cash Statement
A cash statement provides detail about a company's liquidity position. It also shows how the firm is making money and spending it, as well as whether it's borrowing to make ends meet and expand its operations. Accountants don't use "cash statement" when referring to a report about corporate liquidity movements; they use the term "cash-flow statement." This statement provides insight into three financial items: cash flows from operating activities, cash flows from investing activities and cash flows from financing activities.
Accounting
Now that you understand the difference between revenue and cash statement, you clearly see why revenues are not integral to cash statements. In other words, financial managers do not report revenues on a statement of cash flows. Corporate bookkeepers make specific journal entries when recording cash and revenue transactions. They debit the cash account to increase its worth and credit the account to reduce its amount. The accounting concepts of debit and credit are distinct from the banking terms. Bookkeepers debit a revenue account to decrease its value and credit the account to increase its worth.
Financial Reporting
In accounting terminology, "cash" and "revenue" affect various financial statements. As a short-term asset, cash is a balance sheet item. Accountants report revenues in a company's statement of profit and loss, also known as P&L or income statement. A balance sheet is also known as a statement of financial position or statement of financial condition. Revenue items also affect a statement of shareholders' equity because they ultimately flow through the retained-earnings account, which is integral to the owners' equity report.
Significance
For investors, a company's revenue information is significant because it tells them whether the business is consistently growing its sales volume and raking in substantial cash balances. Corporate financiers analyze cash data to make sure the firm has enough money to operate and set itself up for future financial success.
