A cash flow statement (Statement of Cash flows) is financial document reports key components’ analysis for specific period of time. Generally, it may contain analysis for the major categories such as operating, investing and financing activities. That can help to understand cash trends through in-flows & out-flows of business.
simply, this statement may describe the overall views of cash flows that defines the analysis into three major categories for specific time scale. Even, you can analyze flow of cash to determining the short-term viability of a business.
Overview to statement of cash flows
The cash flow statement reflects a business’s liquidity. It may describe in various methods such as indirect or direct. That can be breaks the categories into three major components which through analyze can used for reconciliation the information. Actually statement of cash flows helps to determining the short-term viability of a business in particular time scale. Generally, most of businesses and investors can utilize cash flow statement as important financial statement. Hence, it may show up a repute image as financial stable and progressive business in market.
What is the purpose of the cash flow statement?
The initial purpose of the cash flow statement report is to be describe potential information related to cash transactions. Which may show changes that may reflects balance sheet resulting from various cash activities during the period. That may include all the cash payment, cash receipts and the balance of cash from results from the operating, investing, and financing activities.
Golden rules of accounting: Relation with Cash flows
A statement of cash flows is financial statement. Obviously, this statement may point out the cash transactions that is definitely directly related to accounting. Hence, for the better understanding of cash flows overview, let’s little view about the basic rules of accounting:
| Rule No. | Type of Account | Dr. Side | Cr. Side |
|---|---|---|---|
| Rule#1 | Personal A/C | Debit the Receiver Name | A/C | Credit the Giver Name | A/C |
| Rule#2 | Real A/C | Debit what comes in | Credit what goes out |
| Rule#3 | Nominal A/C | Debit all expenses and Losses | Credit All income and gains (including Profits) |
In the financial accounting system, normally account ledgers are shows Dr. (Debits) at left side and Cr. (Credit) at right side is standard practice. The golden rules of accounting will also applicable on the cash flow statement too. Hence, each cash related transaction are made on standard rule of accounting.
Components of cash flow statement
The statement of cash flows is partitioned into three components, which through cash flows being generated from sources are describe as below:
- Operating Activities: This section may include in-flows and out-flows of cash through regular business operations. Those are cash effects of all business transactions that create revenues and expenditures amount that resulting reflects net income. Actually this is very important category because it describes the cash details that used by daily operations of business.
- Investing Activities: The cash flows for the long-terms assets purchasing and other investments can be consider as investing activities. This category may include cash use for resources such as property, plant, equipment or any other investments for the long-terms assets.
- Financing Activities: Financing Activities: This activity is focus the capital or contributed equity and borrowings of the entity. That may be includes the bonds, stock, cash dividends, etc. Which may result in change financially in the size and composition. You can analyze the capital findings trends through monitor data of cash flows which may describe the rising or down.
The components of the cash flow statement may illustrate the types of cash in-flows and out-flows.
Objectives of cash flow statement
Cash flows is a backbone of the financial system. Obviously the initial purpose of the cash flow statement is to help management for making a plans, and decisions. Objective of the cash flow statement is to illustrate accurate information in the report by describing transaction details made through cash that in inflows and outflows.
Normally management use this report to collect the information illustrated in the cash flow statement for accounting period. Hence, the management can be determining long-terms as well short-terms viability of business. Functionally, Cash flow statement can be helps to analyze the measurement of cash, classification, helps to predict cash trend, and evaluation of cash flows.
Cash Flow Statement Templates & Examples
Creating and maintain records of cash flows is a very important task in order to make a proper budget. It is also important that the records must be maintained with proper structure that makes an easier for retrieves and access whenever needs. Hence, here you can find the best cash flow templates and examples that will help you to organize well. These templates easier for projections of cash flows for various structure, designs and advance level. Hence, it will be makes easier to maintain your financial records for accounting purpose.
Statement of Cash Flows Template
This is a unique statement of cash flows template helps to reporting financial statement for specific time. It may also helpful for analyze the cash flows information to flexibly modify different periods. Naturally, this statement template may include cash related transaction such as revenue and expenses being during particular time length. The layout of this template is well designed, and attractive that advantage for accounting and auditing. All the amount calculations, formation is already fixed for more quick and reliable outputs.
Cash Flow Statement Format
Creating a cash flow statement format is not easy works that is important report for financial management. Maybe it will take a lots of time and effort even, you have to proper knowledge of the accounting system. Moreover, perfect reporting with accurate figures of cash transactions are also important. Hence, it will be very challenging job if you are making it first time or manually. Fortunately, here you can find best cash flow statement templates and formats that will make your work quicker and easy.
Cash Flow Statement example
This is the best example of cash flow statement having an all the details that makes a report well-structured for accounting purpose. Generally, a cash flow statement can have detailed with three major sections that are operating, investing and financing. The net cash flows come as resulting of these sections. Here all the sections calculations can be possible to maintain automatically. Hence, this report template will definitely make your work easy.
Indirect Method Cash Flow Statement
Standard formation of the indirect cash flow statement is always starts report with operating activities with net income for the period. Normally, revenues and losses, non-cash expenditures etc., are added back to or subtracted from net income. Those expenses may consider as non-cash activities such as depreciation, amortization, depletion, gains / losses from sales of assets etc.
Statement of Cash Flow Direct Method Template
This template is prepared by use a direct method for cash flow statement report. The direct method simply presents the income statement on a cash basis. The concept of the direct method will help you to manage your cash flows for your accounting system. The template is well structured and designed that will specifically make a simple the accounting subjects.
Sample Cash Flow Statement Template
Making a statement of cash flows can be tough job if you don’t have a proper knowledge and tools that makes your report perfect. However, now days ready made templates are available on internet that may comply the requirements. Even, you have to modify these templates as your requirements of business. Hence, the series of the cash flow statement templates are available here that may have designed for various types of method and purposes. You can take as reference document that will help you make perfect design, structure and functions needs for statement of cash flows.
Excel Cash Flow Statement Format
Preparing the statement of cash flows is easy actually. Excel is providing an advance tools and formulations are increasing values of the reports. This may include auto calculations and deduction of various transactions, auto highlights the texts, auto background negative cash entry etc. Hence, the percentage of mistakes can be reducing with the excel made cash flow statement. Even more you can also design well all the sections of the statement. So, the statement looks very clear, readable and bold for accounting and auditing purpose.
Monthly Cash Flow Statement Template
Generally, active business owners are always check their wallet before make any financial decisions. Monthly cash flow statement is one of the important report that present the condition of the cash flows of business. Naturally, business owner can check this report by monthly or quarterly. The monthly statement of cash flows report helps to analyze performance of existing plans, and can predict for future plans. Hence, management can take the right decision on reviews of cash flows.
12 Month Cash Flow Statement Template
It will be easier for the businesses to track the overall cash related activities using the 12-month cash flow statement template. Simply you have to maintain the records of 12 months with suitable method of cash flows and accounting purpose. This ready made template will help you manage this records with easy and simple format. Moreover, you can use this template to make a cash flow forecast, and compare projections with actual outcomes.
Direct Method cash flows Vs. Indirect cash flow method
Actually, in the investing and financial activities are not affects by the choice of method. Even, they only disclosing particulars that makes the total figures of operating activities. There are only difference that can reflects cash flows from operating activities with indirect method. Some points that help to understand the difference of two methods are as below:
- Direct Method-Reports the cash effects of each operating activities.
- Indirect method- Starts with accrual net income and convert to cash basis.
- Direct Method – reports all cash receipts and cash payments from operating activities.
- Indirect Method- reconciles from net income to cash provided by operating activities.
In short, both the methods are describes a similar information in the statement. But there are only difference you can check with in operating activities.