6 Cash Flow Statement Flashcards
What is the cash basis of accounting?
Only transactions involving actual cash received or cash spent are recorded.
This method contrasts with accrual accounting, where income and expenses are recorded when they are earned or incurred, regardless of cash transactions.
Define expenses in the context of a cash-flow statement.
Total expenditures made in a specified time such as reported on a cash-flow statement.
This includes all cash outflows for the period.
What are fixed expenses?
Expenses that recur at fixed intervals.
Examples include rent, insurance, and loan payments.
What constitutes income?
What is earned from salaries or wages, as well as other sources like bonuses, interest/dividend received, housing allowance, etc.
Income can come from various streams, including employment, investments, and rental properties.
What is a surplus in financial terms?
When total income exceeds total expenses such as reported on a cash-flow statement.
A surplus indicates a positive cash flow situation.
Define variable expenses.
Expenses over which you have substantial control.
These can include discretionary spending such as food, entertainment, and travel.
