Cash flow from operations

Cash flow from operations is the cash flow from operating activities. If the accounts were prepared on a cash basis, it would simply be the turnover less all expenses.

However, the P&L account is different from the cash flow statement in that it does not wait for the cash implications of a transaction to be settled before the transaction is recognized. For example, if you make a sale of N100,000 and the customer has received the goods or services but has not yet paid, there is no cash movement. However, both you and the customer recognize that a sale has been made; indeed, ownership and custody of the goods have been transferred. So, the P&L account will record this as a credit sale, increasing turnover by 100,000, and to complete the double entry, a receivable is created under that customer's name to signify that they owe you 100,000.

This is the accrual basis of accounting that says that income should be recorded in the period in which...