Purpose of Statement of Cash Flows
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The Statement of Cash Flows shows us where cash is moving throughout a given period.
The Balance Sheet only shows the balance of the Cash account... but not how we got there!
BALANCE SHEET
| Account | Amount |
|---|---|
ASSETS | |
| Cash | $2,300 |
| Accounts Receivable | $0 |
| Equipment | $500 |
| Land | $0 |
| Total Assets | $2,800 |
LIABILITIES | |
| Notes Payable - Long Term | $1,500 |
| Wages Payable | $0 |
| Total Liabilities | $1,500 |
EQUITY | |
| Common Stock | $1,000 |
| Retained Earnings | $500 |
| Total Equity | $1,500 |
We'd use this Cash Flow Worksheet...
...to create this Statement of Cash Flows!
STATEMENT OF CASH FLOWS
| Account | Amount |
|---|---|
OPERATING ACTIVITIES | |
| Net Income | $1,000 |
| Add the Decrease in Accounts Receivable | $500 |
| Subtract the Decrease in Wages Payable | ($500) |
| Subtract Gain on Sale of Land | ($200) |
| Cash Provided by Operating Activities | $800 |
INVESTING ACTIVITIES | |
| Cash Provided by Sale of Land | $1,000 |
| Cash Used to Purchase Equipment | ($500) |
| Cash Provided by Investing Activities | $500 |
FINANCING ACTIVITIES | |
| Cash Provided from Notes Payable - Long Term | $1,500 |
| Cash Used to Pay Dividends | ($500) |
| Cash Provided by Financing Activities | $1,000 |
Total Increase in Cash over Period | $2,300 |
| Beginning Cash Balance | $0 |
| Increase in Cash over Period Cash Balance | $2,300 |
| Ending Cash Balance | $2,300 |