The statement of cash flows is one of the main financial statements. It is to accompany the income statement, balance sheet, and statement of stockholders' equity. The statement of cash flows (also known as the cash flow statement) reports
- the major sources and uses of cash during the period of the income statement
- a reconciliation of the change in an organization's cash and cash equivalents (which are reported on the beginning and ending balance sheets)
- supplementary information including the amount of income taxes paid, the amount of interest paid, and significant noncash investing and financing activities (such as issuing common stock in exchange for land)
The statement of cash flow is important because investors, lenders, financial analysts, and others are interested in an organization's major cash inflows and outflows. (This information is not available from the income statement because the accrual basis of accounting requires that revenues be reported when earned and expenses be reported when incurred.)
The statement of cash flows reports cash inflows as positive amounts and the cash outflows as negative amounts. They are reported in one of the three sections of the statement of cash flows: operating activities, investing activities, and financing activities.