2009 exam 2

[abzzzz]

Hey guys, can anyone tell me why the rent revenue amounts recorded in the cash flow and profit and loss are different? shits fucking with my head!

[iroflmfao]

I think it has to do with the reporting reporting periods.

Something about incurred in this period and yayaay

[AT]

In the information provided before the question, it says at the 31st December there is $2000 of Accrued Rent Revenue, which means the business has earned it, but yet to receive the money from the tenant. This still goes in the P/L Statement as $24000, since $2000 rent a month X 12 months is $24000 of rent revenue earned.
Because that $2000 of accrued rent revenue hasn't been received yet, the total rent revenue in the Cash Flow Statement is only $22000.

Hope that helps. 

[abzzzz]

OHHH so the cash flow is what has physically been received, but the p/l is used for whats earned and perhaps prepaid?

[AT]

The cash flow purely deals with cash that has been paid and received, in this case the rent revenue received.

The Profit and Loss Statement deals only with revenues and expenses. Therefore you may have earned rent revenue, but are yet to receive the cash. However, this is listed under rent revenue in the P/L Statement.
Similarly with wages. Say employees have performed certain work but have not been paid yet in the form of wages, this represents a current liability known as accrued wages. However the heading in the P/L Statement for this is simply Wages expense, as regardless of whether it is prepaid, accrued or whatever, the P/L only deals with the expense incurred in the current reporting period.