Statement of Cash Flows Template is an example cash flow reporting prepared under IFRS. While balance sheet and income statement is prepared on accrual basis, the Statement of Cash Flows reports actual cash transactions in and out of a company. That said, with this post I would like to introduce you in more detail to the term “cash flow”.
As said before, cash flow is a movement of cash and cash equivalents (namely bank accounts and deposits) in and out of a business or project. Obviously most operations of a business require financial resources and in return need to produce inflows of those resources as well. This movement is measured for a certain period of time like income statement for an example.
On the Statement of Cash Flows Template we have divided various cash flows into three groups – from operating, investing and financing activities. Operating cash flows are generated from “business as usual” activities, investments usually use cash to be acquired and financing is ordinarily cash flows gathered from non-business activities. This is a short clarification of those groups. We will cover them in more detail in our future posts. Note also that all those groups include both positive and negative cash flows.
The Statement of Cash Flows Template is used to reflect a business’ liquidity and solvency. While a balance sheet is a snapshot of financial resources and obligations at a single point in time and income statement a summary of transactions, a Statement of Cash Flows shows how much resources the company uses and will need in future as well as how much it’s able to generate on its own. A Statement of Cash Flows tells users so much about the health of a company, when you know how to read it. It also makes different businesses more comparable as it eliminates differences derived from accounting methods selections.