ed managers may also assume that some items on the balance sheet (such as depreciation) represent a source of cash when, however, they do not. Thus the statement of cash flow can help identify problems before they become unmanageable (Netram n.p.).
Each of these financial statements is prepared using information provided by the company. Because of American accounting standards, companies must remain consistent to the rules that they themselves choose to set up. Thus a company which decides to use an accrual method of accounting (recognizing revenue and liability at the time of transaction rather than at the time of payment) must do so for all of its transactions; it cannot use the cash basis for some items and accrual for others. Similarly, once a company chooses a method of inventory valuation (such as first-in-first-out), it must have good reason for changing to a different system. However, American accounting principles do not require that all companies use the same methods, or even that all companies in the
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