Sales do not equal cash inflow because __________.

Answer 1

Sales do not equal cash inflow because revenue can be recorded on credit, meaning that a company recognizes the sale when the transaction occurs but does not receive the actual cash until the customer pays. Additionally, other factors such as returns, allowances, payment terms, and accounts receivable also contribute to the difference. For instance, sales made on installment plans or through financing options may result in delayed cash inflow. Furthermore, factors like uncollected debts or bad debts further affect the actual cash that is received compared to recorded sales.