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What is the difference between income statement and cash budget?

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Question added by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Date Posted: 2016/07/27
Shameer Nazir Madari
by Shameer Nazir Madari , Assistant Finance Manager , METAL AND RECYCLING COMPANY K.S.C. (PUBLIC)

An income statement differs from a cash budget on various fronts, and understanding these distinctions can help you make sense of concepts such as profitability, liquidity management and solvency. The last term relates to a company or initiative holding more assets than liabilities the other name for debts, obligations or financial commitments.

Both are constructed over a period of time such as a month or quarter or year. Income statements enumerate revenue and Expenses. Cash budgets enumerate receipts and disbursements. Income statements are on accrual basis. A Credit sale accrues Revenue and is reported on the Income statement. Since no cash is received until the Receivable is collected, the credit sale would be excluded from the cash Budget. The anticipated collection of the Receivable will be appearing on the cash budget.

Other important difference includes the treatment of depreciation and the repayment of debt. Depreciation is non cash expense that allocates the cost of a long-term investment over a period of time. This allocation is an expense on the income statement, but since there is no cash disbursement, depreciation does not appear on the cash budget. The retirement of debt is not an expense and is excluded from the income statement. Retiring debt, however requires a cash disbursement and would appear on the cash budget.

 

These illustration help clarify the difference between the two financial statements. The purpose of the income statement is to determine earnings, and earnings are not synonymous with cash. The purpose of the cash budget is to determine when cash will be needed. While both use the similar information, the two statements are perceptibly different and should not be confused. 

INCOME STATEMENT SHOWS YOUR FINANCIAL POSITION OF THE BUSINESS DEALINGS. ON THE OTHER HAND CASH BUDGET IS ESTIMATION FOR YOUR IN FLOW AND OUT FLOW FOR THE BUSINESS FOR THE SPECIFIC TIME. 

Tawanda Mutorogodo
by Tawanda Mutorogodo , Finance And Administration Manager , Kenako media

income statement only gives us profit margins of the business while cash budgets is a measure of cash and how to allocate cash.. 

SYED IBRAHIM
by SYED IBRAHIM , Experienced Sr.Accountant/Accountant , Al Haseena LLC - ETA-ASCON GROUP

1) Income Statement is a statement that reveals the income certainly earned; whereas

2 the Cash Budget is projection of Cash flow that is likely to inflow / outflow in the future based past experience and improvements.

Samer Khatib
by Samer Khatib , Economics Moderator , Bayt.com

Income statement is a financial statement that measure the performance of financial company over a specific accounting period. it's a performance of how the business incurs its revenues and expenses through operating and non operating activities and also shows the net profit over a specific accounting period. while Cash budget is an estimation of inflows and outflows for a business for a specific period of time. it used to assess the entity has sufficient cash to fulfill regular operations or whether too much cash is being left in unproductive capacities.

Khawaja Haider Ali
by Khawaja Haider Ali , VAT Specialist Higher Executive Officer , HM Revenue & Customes HMRC

Income statement is the performance of your company for a period. Cash budget is forcast of the receipts and expenditure for a period of 6 months to 1 year.

Muhammad Kamran Bukhari
by Muhammad Kamran Bukhari , Manager Finance , OIC Ministerial Standing Committee on Scientific and Technological Cooperation(COMSTECH)

Income statement is financial statement that's show financial performance of business for specific period i.e., yearly, semi annually etc

Cash Budget is estimate of cash in flow & out flow of business activitites/individuals/companies  

Zaheer uddin Raja
by Zaheer uddin Raja , Accounts Supervisor , Pakistan International Airlines

Main difference is:

Income statement shows past financial performance of an entity for a defined period of time.

Cash budget shows future estimated cash flows of an entity for a defined time period.

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