The cash flow statement is a financial statement that shows how the operating, investing, and financing activities affect a company's cash and cash equivalents over a specific period of time. It provides information about a company's cash flows, which can be used to evaluate its ability to generate and use cash.
The cash flow statement is divided into three sections:
Operating activities: This section shows the cash flows resulting from the company's core activities, such as sales and purchasing of raw materials.
Investing activities: This section shows the cash flows resulting from the buying and selling of fixed assets, such as land, buildings, and machinery.
Financing activities: This section shows the cash flows resulting from borrowing and lending to investors.
The total cash flows from operating activities provide an indication of the company's ability to generate cash from its core activities. The total cash flows from investing activities provide an indication of the company's ability to invest cash in fixed assets. The total cash flows from financing activities provide an indication of the company's ability to raise cash from or pay cash to investors.
A cash flow statement can be used to evaluate the financial performance of a company, identify strengths and weaknesses, and make decisions regarding investment and financing.
To prepare a cash flow statement in Edara:
Step one : Identify the accounts used in interpreting the income statement, which are budget accounts.
Go to "Accounts."
Select "Cash Flow Setup."
Click on "Assets" and then on the ➤ .
Click on "Liabilities" and then on the ➤ .
Click on "Owners Equity" and then on the ➤.
Step Two : Create sections for the cash flow statement.
Click on 🖉 to create a section named "Adjusted Net Income."
The purpose of this section is to exclude non-cash expenses (e.g. expenses)"depreciation ".
Create another section named "Operating Activities" with a total section named "Cash Flows from Operating Activities" and set the display order to 2.
The purpose of this section is to determine the cash flow from operations.Create another section named "Investing Activities" with a total section named "Cash Flows from Investing Activities" and set the display order to 3.
The purpose of this section is to determine the cash flow from investments, such as fixed assets.Create another section named "Financing Activities" with a total section named "Cash Flows from Financing Activities" and set the display order to 4.
The purpose of this section is to determine the cash flow from financing.Reload the page.
Step Three : Direct the accounts to the previously created sections.
Assign the accounts related to the "Adjusted Net Income" section, which includes the accumulated depreciations.
Select the "Adjusted Net Income" section in front of the accumulated depreciations.
Click on "Update Changes."
Assign the accounts related to the "Operating Activities" section.
Click on + next to "Assets."
Select "Operating Activities" in front of "Current Assets."
Click on "Update Changes."
Select "Please select" in front of the cash group.
Click on "Update Changes."
Click on + next to "Liabilities."
Select "Operating Activities" in front of "Current Liabilities."
Click on "Update Changes.
Assign the accounts related to the "Investing Activities" section.
Select "Investing Activities" in front of "Fixed Assets," excluding accumulated depreciations If their accounts are assigned to the fixed asset's node.
Click on "Update Changes."
Assign the accounts related to the "Financing Activities" section.
Select "Financing Activities" in front of "Owners Equity."
Click on "Update Changes."