MEANING & MOTIVES OF CASH FLOW STATEMENT - Accounts and Finance for Managers

The cash flow statement is being prepared on the basis of an extracted information of historical records of the enterprise. Cash flow statements can be prepared for a year, for six months , for quarterly and even for monthly. The cash includes not only means that cash in hand but also cash at bank.

Motives of preparing the cash flow statement:

  • To identify the causes for the cash balance changes in between two different time periods, with the help of corresponding two different balance sheets.
  • To enlist the factors of influence on the reduction of cash balance as well as to indicate the reasons though the profit is earned during the year and vice versa.

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