Which balance sheet line item will help explain a difference between revenue / net income on the income statement and cash from operating activities on the statement of cash flows?

Question: Which balance sheet line item will help explain a difference between revenue / net income on the income statement and cash from operating activities on the statement of cash flows?

One possible balance sheet line item that can help explain a difference between revenue / net income on the income statement and cash from operating activities on the cash flow statement is accounts receivable. Accounts receivable is the amount of money that customers owe to a company for goods or services that have been delivered but not yet paid for. Under the accrual basis of accounting, revenue is recognized when it is earned, not when it is received in cash. Therefore, an increase in accounts receivable means that the company has earned more revenue than it has collected in cash, which reduces the cash flow from operations. Conversely, a decrease in accounts receivable means that the company has collected more cash than it has earned in revenue, which increases the cash flow from operations. By analyzing the changes in accounts receivable on the balance sheet, one can understand how the timing of cash collections affects the cash flow from operations.

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