The statement of cash flow is a financial statement that represents the flow of cash into and out of the company. It also shows the usage of the cash and purposes for which the cash is used. There are three sections of a cash flow statement that can be explained as under:-
Operations
Investing Activities
Financing Activities
There are different formats and methods used to prepare a cash flow statement however the most common method of preparing a cash flow statement is called indirect method. The general format of cash flow statement can be shown as under:-
Company XYZ
Statement of Cash Flow
Indirect Method
| Line Item | Derivation |
| Cash Flows from operating activities | |
| Net Income | From the net income line from income statement |
| Adjustments for:- | |
| Depreciation and Amortization | From corresponding line items in income statement |
| Provision for losses on account receivable | Doubtful accounts of the period |
| Sale facility gain or loss | Income statement gain loss account |
| Trade Receivable increase and decrease | From balance sheet /change in trade receivable |
| Trade payable Increase or decrease | From balance sheet |
| Cash from operations | |
| Cash Flow from investing activities | |
| Fixed assets purchase | From fixed asset account |
| Fixed asset sale | From fixed asset account |
| Net cash | |
| Cash flows from financing activities | |
| Common stock issuance | Increase in common stock and additional paid in capital |
| Long term debt | From the debt account |
| Dividend paid | From retained earnings |
| Net cash in financing | |
| Net change in cash | Summary of all subtotals |