Statement of Cash Flow

The cash flows statement usually has the two main purposes. The more significant one is aimed at reporting cash receipts and disbursements that thappen throughout a certain accounting period. The next purpose that is not less significasnt is provide the information on investments and financial undertakings of the organization during a particular period (Hermanson, Edwards, & Maher, 2011).

Usage

The cash flow statement is very helpful during summarization proctess that has an impact on cash utilized for operations, investment and some other organizational activities that need financing during a specific accounting period. In addition, it serves the necessary information about the previous management decisions taken like the stock assurance or bond sales (Hermanson, Edwards, & Maher, 2011). This information is crucial for the managers, shareholders and other involved entities.

Three Activities Depicted

Operating activities indicate the inflows and outflows that take place during transactions that contribute to the calculation of net profit. Items that appear include cash sale receipts, loan interests, dividends, cash from security trading and any other receipts that show financial transactions for example insurance settlements, refunds from suppliers and in some cases, finances received as compensation for lawsuits.

The statement of cash flow also depicts the investing activities. These include all transactions that entail the procurement or discarding of assets classified as noncurrent. As such, the inflow of cash from various investment processes range from money received during property, plant or equipment sale, cash from the sale of mature securities and also amounts obtained from loans previously made to other entities.

The third and last depiction is the financing activities which is composed of cash inflow and outflow of the various transactions made specifically by both creditors and owners. The inflow transactions include amounts gained from the issuance of capital stock, mortgage, notes, bonds and also borrowing. On the other hand, the outflow transactions include dividend payments, amounts used to acquire treasury stock as well as loan repayments. It is important to understand that interest payment is not included here since it is covered in the income statement under operating activities alongside wages, income taxes and cash for account settlements (Hermanson, Edwards, & Maher, 2011).

References

Hermanson, R. H., Edwards, J. D., & Maher, M. W. (2011). Accounting Principles: A Business Perspective, Financial Accounting. North Charleston: CreateSpace Independent Publishing Platform.