The Statement of Cash Flows written by Carrie Minnich on Mission Minded,the nonprofit blog from local CPA and Advisor firm Dulin, Ward & DeWald, offers a clear overview of this difficult to read financial statement.
Here’s a snippet –
“The statement of cash flows is one of the hardest in a set of financial statements for a reader to understand; however, it can be a powerful tool used to examine the actual cash flowing in and out of an organization. The statement of activities shows what the organization earned and owes while the statement of cash flows shows what was actually collected and spent.
The statement of cash flows is a requirement of financial statements prepared in accordance with generally accepted accounting principles. This statement reports an organization’s cash generated and used during a specific period, classified into operating activities, investing activities and financing activities.
Since the statement of activities is prepared under the accrual basis of accounting, some of the revenues included may not have been collected yet and some of the expenses may not have been paid yet. Basically the statement of cash flows reconciles … ”