A cash flow statement can be prepared in two distinct methods namely direct and indirect. The direct method records of all transactions and make a direct entry into the cash flow statement. This would include the amount of cash that received from the customers or paid to the suppliers. It ends up with a reconciliation of the total net income to the cash incur due to the operating activities. For example, an entity agglomerates the entire sales receipts subtracting or deducting the cash payments that took place for items such as inventory and the salaries. The indirect method involves recording of an indirect entry into the cash flow statement. Net income alongside an adjustment required to facilitate converting the total sum of net income to an amount of cash resulted by the operating activities (Benedicto, 2008).
Cash flow from operating activities refers to the amount of cash attain from the core business operations whereas cash flow from investing is a section that shows the total cash that the company has spent on the investments. In most cases, the cash flow from operating activities is used to highlight the capacity for a particular institution to incur a profit or loss. On the other hand cash flow from investing does not include the amount of shares bought by a company but its’ major concern is the cash spent or made for the purchase or sale of the long-term assets.
In a general point of view, the income statement is a document made to assist determines the profit and loss of the company by comparing the revenue and expenses for a given period whereas the cash flow statement is a statement prepared to show the movement of money in the organization. It majors on the purchase and sales of long-term assets respectively (Edwards, 2007).
An income statement rotates around the revenue and expenses that allows an entity to realize its profit or loss. When the revenue of a firm is greater than the expenses incurred, it implies that there is a net income and when the expense are greater than the revenue generated it means that the firm incurred a net loss. In the context of cash flow statement, the money used to pay for the firms' expenses is deducted from the revenue in order to obtain the cash inflow. It uses the cash for the long-term investment to determine the cash at the end of the year. The income statement is the preferred document use to determine the current financial position of the company. This is because it covers all the assets, liabilities, and capital of the firm making it more detailed (Madegowda, 2007).
Samsung cash flow statement is generated from the core business of manufacturing electronic devices used for communication. The total cash use for the activity is relatively high than that used by apple because it is working harder to be in the same market. It approximately spent 22.6% of the operating expense. On the other hand, apple uses 8.4% of the operating expenses. The amount of cash received from the customers great in the Samsung firm than that of apple. It receives 63% net revenue whereas apple receives 58.1%. This statement shows that the general cash movement in the two organizations differs with a slit range meaning that they are facing stiff competition (Murthy, 2009).
Reference
Benedicto, M.S. (2008) Introduction to Financial Accounting. IE Business School.
Edwards, J. D. (2007) Accounting Principles: A Business Perspective. Financial Accounting.
Madegowda, J, J. (2007). Management Accounting, Global Media
Murthy, G. (2009). Financial Accounting, Global Media
