Introduction Cash receipts and cash payments play a crucial role in the revenue and expense activities of any company. These transactions directly impact a company's cash flow, which is a key indicator of its financial health. In this article, we will delve into the significance of cash flow, the role of cash flow statements, and the difference between revenue and cash flow.
Operating Cash Flow (OCF) Operating Cash Flow (OCF) is a measure of the amount of cash generated by a company's normal business operations. It reflects the inflows and outflows of cash related to revenue and expense activities. OCF is an important metric for investors and analysts as it provides insights into a company's ability to generate cash from its core operations.
The Accounting Cycle The accounting cycle is a process of recording, analyzing, adjusting, finalizing, and reporting a company's accounting activities for a specific period. Cash receipts and cash payments are integral parts of this cycle. These transactions are recorded in the cash book, a financial journal that contains all cash receipts and disbursements.