What happens to the cash flow statement for a company operating on a calendar year when a sale is made in December but the firm isn’t paid until the following January?
When a sale is made in December but the company is not paid until the following January, it affects the cash flow statement of the company operating on a calendar year. The cash flow statement tracks the movement of cash in and out of a company during a specific period and is divided into three sections: operating activities, investing activities, and financing activities.
In this scenario, the sale made in December would be recorded as revenue in the company's income statement for that year, which reflects the company's financial performance. However, since the cash from the sale is not received until January of the following year, it would not be included in the operating activities section of the cash flow statement for the current year.
To properly reflect the cash flow, the transaction would show up in the cash flow statement for the following year when the cash is actually received. In the operating activities section of that year's cash flow statement, the cash inflow would be recorded to show the collection of accounts receivable (from the previous year's sale).
To sum up, the cash flow statement for the current year would not be affected by the sale made in December, but the subsequent cash flow statement for the following year would show the cash inflow from collecting the accounts receivable.