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Accrual accounting vs. cash
Why net income and operating cash flow differ: the accrual rule, how the cash flow statement reverses it, and the gap at each company.
The short answer
Accrual accounting records revenue when it's earned and expenses when they're incurred, not when cash changes hands. That's the basis for net income in every 10-K. The cash flow statement then shows the cash side: operating cash flow starts from net income and adjusts for everything that was recorded without cash moving. 76 of the 89 companies here generated more operating cash flow than net income in their latest year; for those with a profit, the median was 1.47 times net income.
A simple example
A company delivers $500 of consulting in December and sends an invoice the customer pays in January. Under accrual accounting the $500 is December revenue, because the work was done then. Under cash accounting it would be January revenue. The 10-K uses accruals: the $500 counts in this year's net income and sits in accounts receivable until the cash arrives.
The same rule runs the other way for costs. Wages earned in the last week of the year are an expense this year even if they're paid next month, and a machine bought for cash is spread over its life as depreciation instead of being expensed all at once.
From net income to operating cash flow
The operating section of the cash flow statement starts with net income and reverses the accruals:
- Non-cash expenses are added back: depreciation and amortization, stock-based compensation, impairments.
- Working capital changes: more receivables or inventory uses cash; more payables or deferred revenue provides it.
- Non-operating gains and losses, such as the gain on selling a business, are taken out, since that cash shows up under investing.
For fiscal 2026, Apple reported net income of $132.2B and operating cash flow of $145.1B, a difference of $12.9B.
Why the gap is worth checking
Over a single year the two figures can differ for ordinary reasons: a big depreciation charge, a build-up of inventory, customers paying in advance. Over several years they tend to move together. Net income that runs well ahead of operating cash flow year after year means a growing share of profit hasn't turned into cash, which is why analysts look at both. Neither figure is the better one; they answer different questions.
Every company
Net income and cash from operating activities for the latest fiscal year, from each 10-K, sorted by operating cash flow minus net income. Banks are left out, since lending and deposits make their operating cash flow swing from year to year.
Common questions
What is accrual accounting?
Recording revenue when it's earned and expenses when they're incurred, regardless of when cash is received or paid. US public companies must use it.
What is the difference between accrual and cash accounting?
Cash accounting records a sale when the money arrives and a cost when it's paid. Accrual accounting records them when the sale is made and the cost is incurred.
Why is operating cash flow different from net income?
Net income includes non-cash items such as depreciation and stock-based compensation, and it counts sales and costs before the cash moves. Operating cash flow reverses those.
What does it mean when operating cash flow is higher than net income?
That non-cash charges and working capital provided cash that year. It isn't a judgment on the business by itself, and the gap can reverse.
Where do I see the accruals in a 10-K?
In the operating section of the cash flow statement, which reconciles net income to cash from operating activities line by line.
Disclosures
- Editor holdings
- The editor holds shares of Tesla (TSLA) and SpaceX in a long-term retirement account. The editor holds no position in any other company named on this page. As of Nov 11, 2026.
- Compensation
- Nobody paid for this page. No affiliate links on this page.
- Sources
- Each company's own SEC filings, linked next to each number.
- Last updated
- Nov 9, 2026
General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.
More in Learn and Tools · Methodology & Disclosures explains where every number comes from.