The statement of cash flows (SCF) shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down into three sections - operating, investing, and financing activities. The operating section deals with core business cash flows from sales and expenses. The investing section covers cash flows from purchasing/selling long-term assets. The financing section includes cash flows from obtaining/paying debt and shareholders' equity. The SCF provides insight beyond the income statement and balance sheet by showing where a company's cash came from and how it was used.

1. Statement Of Cash Flow (SCF)

2. What is statement of cash flow?

4. Section of SCF
1.Operating activities
" Cash flows from operating activities are primarily derived
from the main revenue producing activities of the business,
which means that the transactions reported in this section
represents the cash components of the events that enter
into the determination of net income in the SCI.
" On revenue: Revenue is reported on the SCI on the year
when goods and services are delivered. On the other hand,
collections from customers will be reported on the SCF on
the year when cash is received.
" On expenditures: Expenses are reported on the SCI based
on three accrual approaches – matching principle, rational
allocation and immediate recognition. However, the cash
disbursements for these expenses are reported on the SCF
on the year payments are made.

5. Section of SCF
1. Operating activities
" The SCI shows a net income computed based on accrual.
On the other hand, SCF shows net cash flows provided by
or used in operating activities.
" Examples of cash flow transactions reported under
operating activities are:
a. Cash received from customers (cash receipts from
sale of goods and rendering of services)
b. Cash received from fees, commissions, and other
income
c. Cash payments to suppliers
d. Cash payments to employees
e. Cash payments for other operating expenses
f. Interest payments

6. Section of SCF
2. Investing activities
" Reported within this section are cash used for acquisition of
property, plant and equipment, intangible assets and other long
term assets as well as cash proceeds from the disposals of such
long term assets.
" Cash flows from investing activities hints on the company’s
ability to generate cash in the future.
" A negative cash flows from investing activities implies that the
company used cash to acquire long-term assets intended to
generate cash and revenue in the future. On the other hand, a
positive cash flow from investing activities may indicate that the
company is divesting or downsizing.

7. Section of SCF
2.Investing Activities
Examples of cash flow transactions reported under investing
activities:
a. Cash payments to acquire property, plant and
equipment, intangibles and other long-term assets.
b. Cash receipts from sale of property, plant and
equipment, intangibles and other long-term assets.
c. Cash loans made to other parties (long term note
receivable).
d. Cash collection on long term note receivable.

8. Section of SCF
3. Financing activities
" Cash flow from financing activities is the last section of the SCF.
This section reports cash received and cash paid to equity
owners and long-term creditors.
" Examples of cash flow transactions reported under financing
activities:
a. Cash received from issuing common shares (or capital
contribution from owners).
b. Cash received from issuing notes or getting a long term
loan from a bank.
c. Cash dividends distributed to shareholders.
d. Cash withdrawals of owners.
e. Cash payment for principal of long-term loan.

9. T-account of Cash
T-account of Cash of ABC Company

10. T-account of Cash
Summarizing Like Transactions and Classifying

11. T-account of Cash
Statement of Cash Flows

12. Preparing the SCF
There are two methods of
preparing the operating
section of the SCF.
Indirect Method
Direct Method

13. Preparing the SCF
Collection from Customer Payment to Supplier

14. Preparing the SCF

15. Preparing the SCF

16. Statement Of Cash Flow (SCF)