The Statement of Cash Flows, also referred to as a “cash flow statement,” is one of three fundamental financial statements. It shows a reader how much cash a company has on hand as of a specific date.
If the accounting for the company is performed on an accrual basis (rather than a cash basis), then income and expenses are recorded when they are earned or incurred rather than when money actually leaves or enters the company’s account. Thus, (a) when income is listed on a company’s income statement during a specific period, it does not mean the cash from that income has actually been received by the company in that period; and (b) when an expense is listed on a company’s balance sheet during a specific period. It does not mean that the cash for that expense actually was paid by the company in that period. A good example of this is depreciation. Depreciation of an asset that a company bought and paid for in the past may be recorded as a monthly expense even though the asset was paid for in the past