Cashflow statement is a part of the financial statements. Cashflow statements provides information to users of financial statements about the cashinflow and cashoutflow from business. Normally most of the business follow the accrual concept when they prepare their books of accounts. Accrual concept does not require the cashinflow or outflow to recognize income, gains, expenses or losses. Because of this concept the Profit as per the profit&loss account or the income statement does not show the cash profits.Always the users of the financial statement needs to read the cashflow statement in addition to the Profit&loss account to understand the real performance of the business. For example, business will be making huge profits but the cashflow statement will show a negative cash from operations. A proper format of the cashflow statement will show the cash from operations, cashflow from financing and cashflow from investing activities separately.
Description
Knowledge Drops are video series which will be less than 1.5 minutes and will be short and crisp videos explaining various financial terms and concepts. This video explains cash flow statement .Cash flow statement is a part of the financial statements. Cash flow statements provides information to users of financial statements about the cash inflow and cash outflow from business. A proper format of the cash flow statement will show the cash from operations, cash flow from financing and cash flow from investing activities separately.
