Example Statement of Cash Flows

Example Statement of Cash Flows

A Statement of Cash Flows tracks what’s coming into your business and what’s going out of your business during a specified accounting period.

You can think of it as a compressed version of your small business’s checkbook with a few other items that affect your cash thrown in.

It is a helpful tool and an annual cash flow statement ought to be prepared for most small businesses…unless you are a very small business.

How detailed it gets depends on the size of your business. However the following is a general format you can go by to generate your statement of cash flows…

Your heading will specify the time period. For example, the heading may state ”For the Three Months Ended March 31, 20XX” or ”The Year Ended December 31, 200XX”.

A statement of cash flows consists of three sections:

Cash Flows from Operating Activities: This section reports a summary of cash receipts and cash payments from operations. It includes the following:

  • Cash received for sales of goods and services
  • Payroll and other payments to employees
  • Payments to suppliers and contractors
  • Rent payments
  • Payment for utilities
  • Tax payments

Cash Flows from Investing Activities: This section reports the cash transaction for the acquisition and sale of permanent assets and investments. This section could include:

  • Purchase of property, plant, and equipment
  • Proceeds for the sale of property, plant, and equipment
  • Purchases of stock or other securities other than cash equivalents
  • Proceeds from the sale or redemption of investments

Cash Flows from Financing Activities: This section reports the cash transaction related to equity financing by the business and borrowings. It could include:

  • Proceeds from loans, notes, or other new borrowings
  • Installment payments on loans or other repayment of debts
  • Cash received from the issuance of stock or equity on the business
  • Dividends payments, purchases of treasury stock, or returns of capital

The “Cash Flows from Operating Activities” is probably it most complex section because there are two methods for preparing this section: the direct method and the indirect method. Both methods will yield the same result, but different procedures are in each one.

The direct method reports the sources of operating cash and the uses of operating cash; however, the necessary data may not be readily available; so many small business owners use the indirect method.

The indirect method reports the operating cash flows by beginning with the net income from your income statement. Then the net income is adjusted for revenue and expenses that do not involve the receipt or payment of cash.

Learn both methods because although the indirect method is easier to prepare, a lot of loan officers require the direct method…which…by the way…requires you to compile an additional operating activities according to the indirect method too.

Example of a Cash Flows from Operating Activities: Direct Method

Cash Flow from Operating Activities:
Direct Method

Sources Of Cash (additions):
Cash received from customers $ 8,000
Uses Of Cash (subtractions):
Cash paid for inventory $ 2,000
Cash paid for insurance $ 500
Cash paid for selling expenses $ 1,500
Taxes paid $ 1,000
Net Cash from Operating Activities $ 3,000

Example of a complete Simple Statement of Cash Flows: Indirect Method

Your Business
Cash Flow Statement
For the year ended Dec. 31, 201X

Cash Flow From Operations
Net Income $ 2,000
Additions(Sources of cash)
Depreciation $ 1,000
Increase in accounts payable $ 300
Increases in accrued income taxes $ 100
Subtractions (Uses of cash)
Increase in Accounts Receivable $ (1,500)
Increase in Inventory $ (250)
Net cash flow from operations $ 1,650
Cash Flows from Investing Activities
Equipment $ (1,400)
Cash Flows Associated with Financing
Notes payable $ 300
Net change in Cash $ 550

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