The cash flow statement demonstrates the liquidity and solvency of the business. Based on the position of finances and their equivalents at the beginning and end of the selected period of time, it shows the movement of the cash during this period. All activities involving the movement of money are considered within this statement, including investment, operating, and financial activities.
The income statement, on the other hand, shows the revenue and total expenses of the company based on the accrual basis that large firms use to record the inflow and outflow of money as it is actually earned and paid out. The Cash Flow Statement deals with actual cash transactions, while the income statement covers both operable and non-operating assets.
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