Canada On credit vs Account Receivables

[paulo.leao]

Hi dear ones,

I am studying accounting fundamentals for curiosity and I have two questions that are highlighted on the spreadsheet.

What is the difference between "on credit" and "account receivables"?
Why A/R is included in the cash flow, if only cash flow includes only cash received or paid?

Thank you.

Period 1
Cash purchases	250​
Cash sales	370​
Cash expenses	40​
Depreciation	55​
There was no inventory at the year end.
Income statement				Cash Flow - Direct			Cash Flow - Indirect
Revenue		370​		Cash from sales	370​		Net income	25​
Purchases		(250)​		Cash on purchases	(250)​
Expenses		(40)​		Cash expenses	(40)​
Depreciation		(55)​					+ Depreciation	55​
Net income		25		Change in cash	80		Change in cash	80
Period 2
Cash purchases	280​
Cash sales	300​
Sales on credit	170​	What is the difference between on credit and account receivables?
Cash expenses	50​
Receipts from receivables	140​
Depreciation	55​
Again, there was no inventory at the year end.
				Why A/R is included in the cash flow, if only cash flow includes only cash received or paid?
Income statement				Cash Flow - Direct			Cash Flow - Indirect
Revenue		470​		Cash from sales	440​		Net income	85​
Purchases		(280)​		Cash on purchases	(280)​		- Increase in A/R	(30)​
Expenses		(50)​		Cash expenses	(50)​
Depreciation		(55)​					+ Depreciation	55​
Net income		85		Change in cash	110​		Change in cash	110​

 

[kirby]

A sale on credit is an Income Statement item. Since no cash is collected, the sale on credit creates an Account Receivable.

The Cash Flow statement mentions Accounts Receivable because it includes the changes in accounts receivable assumed to be caused by cash activity.