Over the course of a given accounting period, it's important to know where our cash is going.
However, the Balance Sheet only shows the balance of the Cash account...
|Notes Payable - Long Term||$1,500|
...it doesn't show how we got to that value from the beginning of the period!
Herein lies the value of the Statement of Cash Flows:
The Statement of Cash Flows shows us where cash is moving throughout a given period.
For example, we might have the following Cash Flow Worksheet...
...which would result in the following Statement of Cash Flows.
STATEMENT OF CASH FLOWS
|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|
|Cash Provided by Sale of Land||$1,000|
|Cash Used to Purchase Equipment||($500)|
|Cash Provided by Investing Activities||$500|
|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
|Beginning Cash Balance||$0|
|Increase in Cash over Period Cash Balance||$2,300|
|Ending Cash Balance||$2,300|
Let's dig into how we can use this Cash Flow Worksheet & Statement of Cash Flows to learn how our Cash balance changed over the period!