Statement of Cash Flows
What is a Statement of Cash Flows?
A cash flow statement reports where money came from during the accounting period and where it was used.
![scf1](https://seeaccountingnow.online/wp-content/uploads/2020/04/scf1.jpg)
How it Works
With any business, cash continually flows into it.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/scf2.jpg)
At the same time, cash continually flows out of it.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/scf3.jpg)
Most of the time, the business should have a cash surplus.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf4.jpg)
This means it has more cash than it uses at that time.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf5.jpg)
At other times, it will have a cash deficit.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf6.jpg)
In this case, the business is using more cash than it is receiving.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf7.jpg)
The business’s management will want to monitor cash flow, closely.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf8.jpg)
If cash flow is inadequate, the business will be unable to meet its obligations
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf9.jpg)
To help them monitor cash flow, management lay down a cash flow budget.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf10.jpg)
Then, at period-end, they will produce a statement of cash flows that shows the actual cash flows for the period.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf11.jpg)
This statement may include the budgeted cash flow set out at the beginning of the period.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf12.jpg)
It may also show cash flow results from previous periods.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf13.jpg)
Analysts and investors will rely upon cash flow statements to determine business’s viability.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf14.jpg)
Suppliers also rely upon the statement of cash flows to determine a business’s ability to pay what it owes.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf15.jpg)
Report Format
The statement of cash flows is divided into 3 sections.
![scf16](https://seeaccountingnow.online/wp-content/uploads/2021/06/scf16.jpg)
Cash Flow from Operating Activities
The operations section shows cash flow from the operations.
![scf17](https://seeaccountingnow.online/wp-content/uploads/2021/06/scf17.jpg)
This section includes things like cash actually received from customers.
![scf18](https://seeaccountingnow.online/wp-content/uploads/2021/06/scf18.jpg)
It also shows cash paid to suppliers and for other operating expenses.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf19.jpg)
The difference shows net cash flows from operations.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf20.jpg)
Cash Flow from Investing Activities
The investments section shows cash flows resulting from investment activities.
![scf21](https://seeaccountingnow.online/wp-content/uploads/2021/06/scf21.jpg)
This section will include any outgoings as a result of buying plant
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf22.jpg)
It will also show outgoings resulting from the purchase of investments.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf23.jpg)
Finally, it will show any cash receipts from the sale of investments.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf24.jpg)
Cash Flow from Financing Activities
The financing section shows cash flows resulting from financing activities.
![scf25](https://seeaccountingnow.online/wp-content/uploads/2021/06/scf25.jpg)
For example, it will show the proceeds of any borrowings from loans or bond issues.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf26.jpg)
It will also show outgoings due to any debt payments.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf27.jpg)
Total Cash Flow from All Activities
Once complete, the total columns will summarize the cash flow information.
![scf28](https://seeaccountingnow.online/wp-content/uploads/2021/06/scf28.jpg)
The total in column will show all cash flowing into the business from all sources.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf29.jpg)
Then the total out column will show how much cash flowed out of the business.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf30.jpg)
The difference will show total cash flow for the period.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/scf31.jpg)
© R.J. Hickman 2020