Case 2 also need include aterial Attached Files: What is the Statement of Cash Flows.docx XXXXXXXXXXKB) Statement of Cash Flows.pptx(1.509 MB) Statement of Cash Flows- Videos.docx XXXXXXXXXXKB) Module...

Case Work #2
1. The income statement and cash flow statement along with the balance sheet are the three important financial statements. The cash flow statement is connected with the income statement by the net profit or net loss and it is the starting point of the cash flow statement and is used for determining the cash flow from operations. The income statement is used for determining the profitability of the business whereas the cash flow statement is used to determine the cash inflows and cash outflows of the business (Burke, Alex. 2022).
2. The revenues which have occurred from the main activities of the entity such as from the sale of goods or by performing the services are considered as revenue earned when the process of earning has been substantially completed. Revenue should be recorded when the entity has earned the revenue. The revenue is recognized when they are realized and are earned i.e. when goods are transferred and services are rendered irrespective of the fact that cash is received or not.
3. Expenses are incurred when the resource of the entity has been consumed. In other words, an expense is incurred when the underlying good is delivered and the service has been performed. It is a cost that is incurred by the business for purchasing the goods and services. The expense recognition principle states that the expense should be recognized in the same period and another case the expenses of the entity would be recognized when they are incurred. Some expenses are difficult to connect with the revenue such as rent and salaries and they are charged to expenses when they are incurred.
4. The matching principle is one of the basic guidelines in accounting. The matching principle of accounting states that the expenses of the entity are matched with the associated revenues for the period. In other words, this principle requires that the revenues and any related expenses of the entity should be recognized in the same reporting period. This principle is connected with the accrual basis of accounting and adjusting entries (Nordmeyer, Billie 2022).
5. The gross profit is referred to as markup because the gross...