Nonprofit Bookkeeping & Accounting For Dummies, 2nd Edition

Chapter 19

Eyeing the Statement of Cash Flows

IN THIS CHAPTER

Understanding what’s shown on the statement of cash flows

Creating and using a statement of cash flows

Using cash flow ratios to flag potential problems

The statement of cash flows is one of the major financial statements required by generally accepted accounting principles (GAAP). This statement reports the inflow of cash to an organization and the outflow of cash from an organization. Cash inflows are cash receipts that come from operating, financing, and investing activities. Cash outflows are cash payments for operating, financing, and investing activities.

The information found on the statement of cash flows gives users an idea about your organization’s ability to generate positive future cash flows, its ability to pay debts, and a summary of sources (inflows) and uses (outflows) of cash. The statement of cash flows is a better indicator of this than the statement of activities because the statement of activities can report transactions on the accrual basis not the cash basis. (See Chapter 17 for more about statements of activities.) This chapter explains the importance of the statement of cash flows, how it indicates ...