Читать книгу Financial Accounting For Dummies - Maire Loughran - Страница 53

This section offers an overview of the statement of cash flows. You prepare the statement of cash flows using certain components of both the income statement and the balance sheet. The purpose of the statement of cash flows is to show cash sources (money coming into the business) and uses (money going out of the business) during a specific period of time. This information is used by investors and potential creditors to gauge whether the business should have sufficient cash flow to pay dividends or repay loans.

The statement of cash flows is very important for financial accounting because generally accepted accounting principles (see Chapter 4) require you to use the accrual method of accounting. This means that you record revenue when it is earned and realizable (regardless of when money changes hands), and you record expenses when they are incurred (regardless of when they are paid). On the flip side, when using the cash method of accounting, a transaction isn’t acknowledged until money changes hands. (A company may use a cash-basis statement for income tax return preparation.)

The statement of cash flows gives the financial statement user a basis for understanding how noncash transactions showing up on the balance sheet and income statement affect the amount of cash the company has at its disposal.