STATEMENT OF CASH FLOWS

INTRODUCTION:
        Cash flow is an important consideration for all companies The statement is one of the major financial statements required for companies to provide information to investors, creditors, and other that is in compliance with generally accepted accounting principles 

PURPOSE OF THE STATEMENT:
         The objective of a statement of cash flows is to provide information about the cash receipts and cash payments of a business entity during the accounting period.

Methods of cash flow statement

• Direct Method
• Indirect Method 

Classification of Cash Flow Statement:
Cash flow statement can be divided into three parts;

• Operating activities
• Investing activities 
• financing activities

Operating Activities:

The operating activities section shows the cash effects of revenue and expense transactions.

CASH RECEIPTS

• Collections from customers for sales of goods and services 
• Interest and dividends receives

CASH PAYMENTS

• Payment to suppliers of merchandise and services, Including payments to employees
• Payment of interest
• Payments of income taxes

Investing Activities:

Cash flows relating to investing activities present the cash effects of transactions involving plant assets, intangible assets, and investments .

CASH RECEIPTS

• Cash proceeds form selling investment and plant and intangible assets
• Cash proceeds from collecting principal amounts on loans 

CASH PAYMENTS

•  Payments to acquire investments and plant and intangible assets
• Amounts advanced to borrowers

Financing Activities

Cash flows classified as financing activities include the following items that result from debt and equity financing transactions.

CASH RECEIPTS

• Proceeds from both short term and long term borrowing 
• cash received from owners

CASH PAYMENTS

• Repayment of amounts borrowed 
• Payments to owners such as cash dividends