A cash flow statement is a financial statement that summarizes and breaks down the sources and uses of company cash and cash equivalents over a specific period of time.

The cash flow statement contains two columns.

Column one

  • The first column defines the name of each category of cash receipts and payments. Each name defines a row in the cash flow statement. The rows are defined by the company and do not necessarily correspond to the ledger accounts.

    The most general categories for the rows in the cash flow statement are defined by the requirements of financial reporting in the country/region in which the company operates. Usually, a company must report changes in operating, investing, and financing activities. The rows within each of these broad categories show how the overall change in cash holdings was achieved during the period.

    At the end of the cash flow statement, rows are usually defined for the period's beginning and ending amounts for cash and cash equivalents.

    Country/region requirements may include that foreign currency cash flows must be translated to the company currency equivalent by using the current exchange rate at the time of the cash flows. Additionally, the effect of exchange rate changes on cash that is held in foreign currencies (unrealized/"realizable" gains/losses) may also be required as a separate item in the reconciliation of beginning and ending balances.

Note Note

Depending on how the chart of accounts has been set up, there can be different types of postings on one ledger account that need to be shown in different rows in the cash flow statement. To resolve this issue, you could modify the chart of accounts at the start of a fiscal year by splitting a ledger account into two or more accounts, or you can post to the ledger account by using specific dimensions for various types of transactions.

Column two

  • The second column defines the total amounts in the period for each row. Debits and credits are added together in the total rows for the main components of the cash flow statement. For more information, see Design the row structure of a financial statement.

    You will have more perspective about what is causing the movement of cash within the company if the sub-branches of the main components are more specific and if the breakdown of the cash flow is more detailed.

See Also