What is the simple meaning of cash flow?
Answer and explanation
Correct answer: The inflow and outflow of cash in a business
Cash flow refers to the movement of actual cash and cash equivalents into and out of a business during a period. Cash receipts may come from sales, loans, or owners’ contributions, while payments may include wages, purchases, rent, and loan instalments. It is different from profit because a sale on credit may increase profit without bringing cash immediately. Thus, option A is correct.
Frequently asked questions
What is the correct answer to this question?
The inflow and outflow of cash in a business
Why is this the correct answer?
Cash flow refers to the movement of actual cash and cash equivalents into and out of a business during a period. Cash receipts may come from sales, loans, or owners’ contributions, while payments may include wages, purchases, rent, and loan instalments. It is different from profit because a sale on credit may increase profit without bringing cash immediately. Thus, option A is correct.
Which subject and chapter does this question cover?
This is a Class 11 Accountancy question. Chapter: Financial Statements I.
