how cash flow ignores accrual concept??

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Solution

Hi Muskan, cash flow statement depicts the cash used or generated through different business activities. So, during a particular year all the cash related transactions are recorded in this statement, irrespective of the fact that whether the transactions belong to the previous year or to the next year. So, we can say that the transactions are recorded when cash is received or paid and not when the right to receive or paid is established.

Thus, we can say that cash flow statement is prepared on the cash basis system and it ignores the accrual basis of accounting.

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