Sai Kumar S N

As per Matching concept, if there is any expenditure incurred to gain some revenue in a specific time period, then both the income and expenditure need to be recognised during that period.

Example: If freight inwards is incurred for transport of goods and the goods have been sold, then both the revenue and expenditure are to be accounted during the same period. 

At the outset, examples of Departmental Stores would be Big Bazaar, Reliance Mart etc. On the other hand, examples of Multiple Shop or Chain Stores would be Bata stores, McDonalds, Pizza Hut, Shell Petrol Pumps etc.

(i) Product Lines: Departmental stores would cater to a variety of products and product categories. E.g. Big Bazaar sells electronics, clothes, FMCG goods etc. Multiple shops sell only one or few product categories. E.g. Bata focuses on footwear.

(ii) Reach and Access: Departmental stores are usually centrally located to improve access to customers while multiple shops are scattered to be closer to customers and also be readily available anywhere.

(iii) Customer Services: Departmental stores can offer customer services such as free home delivery while chain stores usually do not extend such services to customers.

(iv) Layout & Design: The layout and design of Departmental stores is typically as per convenience while multiple shops follow the same or very similar layout and design across stores.

When business buys raw materials for manufacturing / ready goods for trading, it pays the supplier cash - Cash Outflow. The raw material is converted into finished goods. At this point, there is an increase in stock (finished goods). Hence, increase in stock is assumed to be cash reduction in cash flow statement. On the other hand, if a good is sold, and there is immediate receipt of cash, then there is cash inflow and it negates the cash outflow that happened initially. If goods are sold on credit, there is no immediate cash inflow. In other words, the cash that was used to buy the goods initially has not returned to the business. Hence, increase in accounts receivables is cash reduction in cash flow statement