ABSTRACT
511 Advocates of cash flow accounting believe that there can be no objective ‘correct’ measure of the income and financial position of a company, and that the traditional profit and loss account and balance sheet of a company should therefore be replaced by a statement of cash flows. Such a system would have many advantages but could not easily be accommodated within the present requirements of the law. In addition users of accounts have a continuing need for a useful measure of the profitability of a company which would not be satisfied by a statement of cash flows alone. Nevertheless, in the Committee’s view there is much of value in the cash flow accounting principle. In the light of the recent liquidity crisis statements of companies’ cash positions and internal forecasts of cash flows for the forthcoming year merit immediate development.
