On the statement of cash flows there are certain disclosed amounts which are all connected as they relate to the same area. When preparing the statement, you can easily check yourself by just adding all those connected amounts and compare it with the change on the balance sheet. If it all equals, you can be sure that you have included and disclosed all information.

For an example, a very easy check is the PPE items on the statement under all sections. You include the acquisitions, take off the depreciation and the difference between the proceeds and loss / gain made from the sale to reach a change in carrying value of PPE on the balance sheet. Basically what you do is add sales, take off depreciation as it decreases the carrying value and also take off the carrying value of sold and disposed goods as this also decreases the carrying value. The result should equal to the change on the balance sheet.

It’s fairly similar to loans – the flows shown on the statement must add up to the change on the balance sheet. To simplify, for an example loan amounts given and paid back must add up to the change on the balance sheet for loans receivable. Something to watch out for loans though are the adjustments done to operating profit – namely write offs. They are never cash outflows, but as they are shown on the balance sheet, they must be included in those checks.

The statement of cash flows does not live a life of its own. It’s always connected with all the other statements and as such it can be very easily checked for mistakes.