Successful about business, what drives the balance sheet are sales and expenses. In additional, make assets and liabilities of a company. Among the more complicated accounting items are the debtors. In a theoretical situation, think a company that offers all customers a credit period of 30 days which is fairly common in transactions between companies. Active progress, which amounts to customers who bought products on credit due to the company. It is a promise if the company will receive.Basically, debtors have the revenue due from the sale by the end of the reporting period. Cash not to rise until it actually collect money from customers of the company. But the amount of money in accounts receivable in total sales from the same period. The company made the sale even though he has all the money from the sale yet. Turnover, then it is equal to the amount of cash that the company built.
For the real cash flow for the auditor to deduct the amount of credit sales revenue from the sale in cash. Then add the amount was collected from credit sales, which was established in the previous reporting period. If the volume of sales on credit by a company during the period is greater than what was collected from customers, then receivables increased during the period, and the company has to withdraw from net income that difference.
If the amount collected in the period exceed credit sales, so receivables decreased during the period and the numerator should be included in net income from the difference between loans at the beginning of the period and debtors to the end of the period.
