how can cash flow statement work or explain it?
Answers
The purpose of a cash flow statement is to provide a detailed picture of what happened to a business's cash during a specified period, known as the accounting period. It demonstrates an organization's ability to operate in the short and long term, based on how much cash is flowing into and out of the business.
Example:-
• The two methods of calculating cash flow are the direct method and the indirect method.
• A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.
Steps:-
1- Prepare—Gather Basic Documents and Data
2- Calculate Changes in the Balance Sheet
3- Put Each Change in B/S to the Statement of Cash Flows
4- Make Adjustments for Non-cash Items from Statement of Total Comprehensive Income
5- Make Adjustments for Non-cash Items from Other Information
6- Prepare Movements in Material Balance Sheet Items to Verify Completeness
7- Add Up and Perform Final Check