Profit differs from cash flow from operations because the revenue recognition and matching principle result in the recognition of revenues and related expenses that are independent of the timing of cash receipts and payments.

Question

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Profit is calculated based on the revenue recognition and matching principle, which may not coincide with the actual cash inflows and outflows. Cash flow from operations only considers the actual cash receipts and payments during a period. Therefore, profit and cash flow from operations can be significantly different.

Profit Differs from Cash Flow from Operations Because the Revenue