Efectivo vs Devengado: Cash Flow and Accounting Principles

Efectivo vs Devengado

Cash Flow

• Efectivo: Refers to the actual inflow or outflow of cash and cash equivalents.
  • Represents the real movement of money into or out of a business.
  • Affects a company's liquidity and ability to pay its debts.
• Devengado: Refers to the recognition of revenues and expenses, regardless of cash flow.
  • Represents the earning or incurring of revenues and expenses, even if cash has not changed hands.
  • Affects a company's profitability and financial performance.

Accounting Principles

• Accrual Accounting: Recognizes revenues and expenses when earned or incurred, not when cash is received or paid.
  • Matches costs with revenues to accurately reflect a company's financial performance.
  • Devengado is used in accrual accounting to recognize revenues and expenses.
• Cash Accounting: Recognizes revenues and expenses when cash is received or paid.
  • Simple and easy to implement, but may not accurately reflect a company's financial performance.
  • Efectivo is used in cash accounting to recognize revenues and expenses.

Asset Valuation

• Efectivo: Assets are valued at their cash equivalent value.
  • Examples: cash, accounts receivable, and inventory valued at their net realizable value.
• Devengado: Assets are valued at their economic value or fair value.
  • Examples: property, plant, and equipment valued at their historical cost or fair market value.
  • Intangible assets valued at their fair value or amortized cost.

In summary, efectivo refers to the actual flow of cash, while devengado refers to the recognition of revenues and expenses. Understanding the difference between these two concepts is essential for accurate financial reporting and decision-making.

Learn the difference between efectivo and devengado in accounting, including cash flow, accrual and cash accounting, and asset valuation. Understand how these concepts impact financial reporting and decision-making.