A lot of people are not aware of what the accounting terms mean and this is one of the reasons why there are a lot of confusions all the time. Cash flow and income are not the same thing and a cash flow statement is not the same as an income statement, but a lot of people make this mistake. This is where you will find a few details about each.

First of all, you need to know what each of them does. The cash flow statement is a financial tool you can use so you can see how cash comes in and goes out of your business. On the other hand, the income statement uses all the sales and other revenues along with the costs and the expenses in order to show you the profit or loss you have had.

The most important elements of the cash flow statement are the heading so you can see the details of the company and of the period for which it was generated. After that the inflows and the outflows are also the ones that will show you the outcome of the period for each month. This is in turn will offer the result you need to know about the cash.

If the cash flow statement shows that you have a deficit, this means you have a lot of extra cash you can use for other things. This is not ideal, since you can put them to good use. This is also a tool that you will learn from if you are in need of finance in order to regulate the expenses you have had and to get on with all the other projects.

An income statement on the other hand is a little different. The heading of the statement is also used with the name of the company and the period for which it was generated. It uses all the revenues obtained within that frame, all the costs of the goods bought for the activity and all the costs you needed to operate in order to get on with it as well.

Taking out the costs and expenses out of the revenue will show you how much you have earned. This result of the income statement is not the real profit, since you still have to apply taxes to it as well. This is the bottom line and this is where you will be sure if your activity has brought you a hefty profit or if you have suffered a big loss instead.

If you want to see a few examples of these financial tools and how they are able to help you in order to get all your activities on the right track, you can visit businessplanhut.com for more details. This is where you will learn the true power of the financial tools and how they are able to help you get ready for the future and prepare for the outcome.

A cash flow statement http://www.businessplanhut.com/what-cash-flow-statement-and-components and an income statement http://www.businessplanhut.com/what-income-statement-revenue-and-expenses-explained are very close and they can offer you a good way to see where you are, but they are not the same. If you use the site named afore in order to learn more about them, it will be a lot easier to read all the elements they contain and thus you will know if the result is the one you were expecting or not.