The Statement of Cash Flows describes where your money came from and where it went over a certain period in the past. This report helps you to examine your ability to generate cash and how you use it. It also breaks down your cash flow into four sections for easier analysis:
Operating
Operating activities are the principal revenue-producing activities of your business. Cash flow from these activities consists of cash transactions that contribute to net income, such as the sale or purchase of goods and services. Looking at this section of the report can help you to determine the business's ability to generate cash from day-to-day operations. This cash is used to maintain your business, repay loans, and pay owners.
Investing
Any time you acquire or dispose of long-term assets, like a vehicle or equipment, cash flows from investing activities are affected. The amounts in the Operating Activities section outline changes in accumulated amortization and depreciation accounts.
Financing
Cash flows from financing activities consist of transactions that affect the company's debts and capital, such as receiving or paying a long-term loan, shares, or owner investments or withdrawals. You should compare the amount of cash created by Financing to that created by Operations. Note that credit-card purchases are categorized as financing because you are borrowing money from the credit-card company.
Cash and Cash Equivalents (shown on the last three lines on this report)
Cash equivalents are short-term (3-months of less), easy-to-sell, low-risk investments held to meet short-term cash commitments rather than for investing or other purposes. For this report, Sage 50 Accounting considers payments received by credit card as cash. In essence, this report shows the changes to various accounts over a period that you select.
A Statement of Cash Flow can be created only within a fiscal year (either this year or last).
Note: Make sure that all of your accounts have been assigned to an appropriate account class before creating this report.
To view this report, open the Report Centre in the Home window, select Financials, and then the statement of cash flows report by name. Click Display.