Financial Education - The profit and loss statement and the cash flow statement

According to the accounting postulates accepted by a high percentage of the world's financial institutions, the statement of profit and loss is the one whose purpose is to determine the amount by which the accounting income exceeds the accounting expenses, calling the result a profit if it is positive, and otherwise it is called a loss.

As a theoretical complement, the statement of profit and loss is dynamic in nature since it presents for a given period of time the results of a business in terms of its revenues, costs, profits or losses, from this evidence it is concluded that the authors agree that the statement of profit and loss reflects the expenses, costs, revenues, profits and losses of a given period within the company, i.e., the results of a business in a given period.

While the cash flow is understood as the basic financial statement that shows the changes in the financial situation through the cash and cash equivalents of the company in accordance with generally accepted accounting principles (GAAP), i.e., in accordance with international accounting standards (IAS).

The cash flow statement or statement of changes in financial position is the one that aims to communicate the changes in the resources of an entity and its sources in a given period showing the activities of operations, financing and investments and their final reflection in cash.

However, following the above, there is a discrepancy with the postulates since some authors explain that the cash flow statement communicates the changes in the entity's resources and their sources in a given period as the cash inflow and outflow of the company in a certain period.