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16.1 Explain the Purpose of the Statement of Cash Flows

Purpose​

Statement of Cash Flows:

  • Shows cash receipts and payments
  • Explains change in cash balance
  • Complements income statement and balance sheet
  • Shows cash from three activities

Why It's Needed​

Income Statement Shows:

  • Revenues and expenses
  • Net income
  • But not cash flows

Balance Sheet Shows:

  • Assets, liabilities, equity
  • Cash balance
  • But not cash flows

Statement of Cash Flows Shows:

  • Where cash came from
  • Where cash went
  • Why cash changed

Luxembourg Compliance Note​

Statement of cash flows in Luxembourg:

  • Required for larger companies
  • Must follow PCN format
  • Must be filed with RCS (if required)
  • Must comply with standards

Think It Through​

Why is the statement of cash flows important even if you have an income statement and balance sheet?