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Financial statements

Cash flow statement

A cash flow statement explains changes in cash from operating, investing, and financing activities.

Reviewed by the Booksmrt bookkeeping teamLast reviewed 2026-07-27

How it works in the books

The statement bridges profit and cash by showing items such as receivable changes, equipment purchases, borrowing, loan principal, and owner financing.

Example

A business can report profit while cash falls because customers have not paid and the company purchased equipment.

What can go wrong

A bank transaction list is not the same as a properly classified cash flow statement.

Compare Cash flow statement

Income statement vs. cash flow statementUse the income statement to understand reported performance and the cash flow statement to understand why cash changed. Profit and cash differ because not every revenue or expense moves cash in the same period, and not every cash movement affects profit.

Sources

Educational information only. Booksmrt provides bookkeeping services, not tax, legal, audit, or investment advice. Confirm material accounting and tax decisions with the appropriate professional.