Statement of cash flows
The statement of cash flows shows when money was received or spent by the corporation.
The statement of cash flows shows activity over a period of time. It’s a ‘from one date to another’ financial statement. It is usually headed ‘for the year ended…’.
The statement of cash flows is different to the profit and loss statement [link]. The profit and loss statement shows when the corporation committed to spending money or when an order was received (rather than when it was paid). The statement of cash flows shows when the money actually came into or left the corporation.
The money coming in is called ‘cash inflows’ and the money going out is called ‘cash outflows’.
Cash flows are usually sorted into groups in the statement. The groups are usually:
- operating activities
- investing activities
- financing activities.
You can find definitions of these on our finance definitions page. [link]
What you should be able to tell from the statement of cash flows
After looking at the statement of cash flows, you should know:
- what period of time the statement covers
- what happened to the corporation’s cash during that time
- whether more money came into the corporation than went out during that time
- whether there is enough cash to fund operating expenses and debts.
The statement of cash flows on its own won’t tell you if the corporation is solvent. You also need to look at the other financial statements.
Example statement of cash flows
Below is a very simple example of a statement of cash flows.
The ‘net cash’ numbers are from adding up all the figures in that group.
Brackets around numbers in financial statements mean the number is negative. A negative cash flow number shows money leaving the corporation. A positive number shows money coming into the corporation.
The ‘closing cash at bank’ at the bottom of the statement is made up of the bank balance at the beginning of the year, plus the ‘net cash’ figures in the statement. The closing cash at bank figure should equal the cash at bank balance shown in the balance sheet.
Current year | Previous year | |
$ | $ | |
| Cash flows from operating activities |
|
|
| Grants received | 100,000 | 25,000 |
| Payments to suppliers and employees | (75,000) | (30,000) |
| Donations received | 10,000 | 10,000 |
| Net cash from operating activities | 35,000 | 5,000 |
|
| |
| Cash flows from investing activities |
|
|
| Sale of old computer equipment | 1,000 | |
| Purchase of new vehicle | (50,000) | |
| Net cash from investing activities | (50,000) | 1,000 |
|
| |
| Cash flows from financing activities |
|
|
| Lease payments | (15,000) | |
| Net cash from financing activities | (15,000) | |
|
| |
| Closing cash at bank | 10,000 | (25,000) |