Main Content
Lesson 1: Introduction to Financial Statements
The Statement of Cash Flows | Video
Review Chapter 1, pp. 14–15.
The statement of cash flows explains the change in cash from the beginning of the year to the end of the year. The statement reflects three types of business activities where cash is provided or used:
- Operating activities consist of the daily activities of the company related to earning income. However, revenues and expenses as reported on the income statement reflect cash and accrual elements. One method of creating the operating activities section of the cash flow statement alters net income to arrive at the net cash inflows or outflows from operations.
- Investing activities are transactions related to buying and selling long-term assets, such as property, plant, and equipment (PPE), or investments in securities, such as stocks and bonds.
- Financing activities include borrowing or paying off the principal amount of a loan, receiving capital contributions from owners, and paying cash distributions to owners.
This is a basic introduction to the statement of cash flows, and we will cover this topic in greater detail in Lesson 13.
Robyn’s statement of cash flows for the month of September would look like Table 1.5.
| Robyn's Retail | |||
| Statement of Cash Flows | |||
| For the month ended September 30, 20xx | |||
| Operating | |||
| Net Income | $ 1,292 | ||
| Depr. Exp | 108 | ||
| Inc. A/R | (800) | ||
| Inc. Inventory | (10,000) | ||
| Inc. PPD. Rent | (8,800) | ||
| Inc. PPD. Insurance | (550) | ||
| Inc. Supplies | (500) | ||
| Inc. A/P | 5,250 | ||
| Inc. Int. Payable | 50 | ||
| Inc. Unearned Revenue | 100 | ||
| Cash outflows from Operations | (13,850) | ||
| Investing | |||
| Purchase of Furn. & Fixtures | (3,000) | ||
| Purchase of Equipment | (5,000) | ||
| Cash outflows from investing | (8,000) | ||
| Financing | |||
| Issued Common Stock | 50,000 | ||
| Cash inflows from Financing | 50,000 | ||
| Net increase in cash | 28,150 | ||
| Beginning Cash | 0 | ||
| Ending Cash | $ 28,150 | ||
Please watch to learn more about the statement of cash flows.
Note: Video removed. You will have access to the video in the actual course.