The Statement of Cash Flows is often a challenge for financial professionals to prepare. This course describes the purpose of the statement, the elements that make up the statement, and a strategy on preparation. The course also walks its participants through the process of preparing a basic Statement of Cash Flows.

This course serves as an overview for accounting and finance professionals who need to sharpen their fundamental understanding of the core financial statements and how they work together.

Intro Video Transcript

Statement of Cash Flows – An Introduction By Erik Slayter Hello, My name is Erik Slayter, and I will be showing you a little bit about How to Create a Statement of Cash Flows. Little bit about myself before we start; I am a professor in the Ag Business Depart at Cal Poly, in San Luis Obispo, that’s one of California’s State University Schools, and San Luis Obispo is about halfway between Los Angeles and San Francisco, for those of you that aren’t so familiar with California geography. I’ve been a professor for 13-14 years now, so this is a very enjoyable topic here statement of cash flows because it’s one of those topics where you can get a lot out of but it does take a bit of work. We’re going to rely on some of your knowledge about how financial statements work, the balance sheet, the income statement in particular and we’re also going to rely on basic accounting knowledge. If you feel like you need to bolster that a little bit, there are some other sessions that I’ve done here on Performative that you might want to go back and look at those before you focus your time here, if some basic accounting concepts are maybe a little big for you. Okay so, to jump into our statement of cash flow session here, this is just an introduction, of course statement of cash flows can get much more complicated. We’re going to look at kind of a basic set, well, actually prepare a statement of cash flows as part of today’s session. So, let me show you the agenda: the agenda says here what we are going to do, we’re going to talk about why the Statement of Cash Flows is even important and I’ve got a little exercise we can do on that and then we’re going to talk about the sections of the Statement of Cash Flows, broken into three distinct sections, and we’re going to talk about what the indirect approach means as compared to the direct approach and then like I mentioned a moment ago, we’re going to do some hands-on, we’re going to get our hands dirty and prepare a Statement of Cash flows. Agenda: • What is the Statement of Cash Flows and why is it important? • Sections of the Statement of Cash Flows • Understanding the Indirect approach • Hands-On: Learn while preparing a Statement of Cash Flows So let’s start with: What is a Statement of Cash Flow? • Categorize the sources and uses of cash for a company • Different than an Income Statement – the Income Statement categorizes Revenues and Expenses • Not every revenue / expense is paired with cash • Not every event that involves cash is paired with revenue / expense So, the Statement of Cash Flows main goal is to show you where a company got its cash, in other words the sources and where it spent its cash, in other words the uses. If you think about the Income Statement; the Income Statement is saying “Where we earned our revenue and where we incurred our expenses.” But if you’re using a cruel basis accounting which any sizable company is going to do, then you have a situation where you don’t know what’s going on with your cash because the whole purpose of cruel base accounting is to not worry where the cash is spent so much, but instead to worry about when you earn the revenue and when you incurred the expense. So, in other words revenue and expenses aren’t necessarily paired with cash. You might pay for something in advance and get to use it later or you might do some work and get paid after the fact for it. So, what the Statement of Cash flows is trying to do for us, is show us where do we get our cash and where did we spend our cash. Let me show you a little example here of why the Statement of Cash flows is important. So, what we have here is two Income Statements for two companies. So, we have Company A and Company B and it’s just a very, very basic Income Statement • Sales • Expenses • Net Income Not many of the detail but we can see here that both companies are earning five hundred thousand dollars ($500,000) of revenue, of sales. They both have four hundred and twenty five thousand dollars ($425,000) of expenses, in other words they both are earning seventy five thousand dollars ($75,000) of Net Income. So, if all we looked at was an Income Statement, we would have no reason to believe that Company A and Company B have any differences right? We’d say “These guys are essentially equivalent companies.” We could even go a step further and look at the balance sheet and say “How much cash do these guys have?” and we could say “Well at the beginning of the year, they both have twenty five thousand dollars ($25,000) cash and at the end of the year they both have twenty five thousand dollars ($25,000) cash. In other words, the amount of cash that they brought in is equal to the amount of cash that went out. So, therefore, again we look at these two companies and they appear to be very similar right. Of course I’m setting you up here, there must be something different, so let’s jump down to this last section here where we looked at “Cash received” and when you see it written this way “received” and then in brackets (paid) What that means is; received is a positive number, paid means a negative number, so if we see any negative numbers it means outflow of cash and if we see positive numbers we see an inflow of cash, okay? So now we can start to see information that will be coming from our State of Cash Flows that starts to describe maybe why these aren’t so equivalent even though everything up until this point looks equivalent. Let’s start with cash received from customers. Okay, so, Company a received four hundred and fifty thousand dollars ($450,000) cash from customers, and Company B only three hundred and fifty thousand dollars ($350,000) cash from customers. So, even though they have the same amount of sales, they have a different amount of cash coming in. In other words, they’re selling on credit and saying “Yes, you can pay us later.” But Company A is collecting almost all of their sales, there’s only fifty thousand dollars ($50,000) worth of sales they haven’t collected that’s sitting in accounts receivable presumably. Whereas, company B has a hundred and fifty thousand dollars ($150,000) sitting in accounts receivable. The difference between the five hundred and sales and the three fifty of cash received from customers. So, what this is starting to point at is that Company A perhaps, we need to dig deeper but perhaps is doing a better job of collecting from their customers. So, the natural questions that maybe we would start to ask as managers would be, “Is Company A servicing their customers better, are their customers more willing to pay than the company B customers? Is it that Company A makes collection calls and does all the things to hassle their customers into paying and Company B just lets the money come in when it does, so, are there some manager issues? Okay so, continuing on, we see this next one from Sale of PP&E Property Plant and Equipment. Okay so, we’re talking about fixed assets or equipment here. So you can see Company A pulled in five thousand dollars ($5,000) of cash from selling of some old equipment, maybe they upgraded some equipment and they were able to sell some of the old stuff off, and Company B brought in sixty thousand dollars ($60,000) cash from the sale of equipment. So again, we don’t know for sure what’s happening, we need to dig deeper but on the face of this it looks to me like Company A is continuing to use their equipment and Company B is saying “Well, let’s maybe divest of some of this equipment, we don’t need quite the investment because maybe we’re not producing as much or something like that.” Okay, so maybe Company B had to sell off some of the equipment to get enough cash to run their business. Again, like I say, we have to dig deeper but it looks like something is going on here with the equipment and selling off this equipment, Company A is not selling as much or at least not bring in as much cash from it. Okay, let’s move onto the next line, here we see “Cash paid” because it’s a negative number, so paid to suppliers. So again, their expenses were the same four hundred and twenty five thousand dollars ($425,000) of expense. But, Company A is only paying out three hundred and eighty thousand ($380,000), whereas Company B is paying off four hundred thousand dollars ($400.000) cash. So again, like all of these we would have to dig deeper to know for sure but we could draw a couple of guesses. For example: maybe Company A is doing a better job at managing its suppliers and maybe they have a better relationship with their suppliers and they can stretch them a little bit further before they pay them. Maybe Company B is having some credit issues and they are going to have to pay for more stuff up front and not get granted credit. Those are a few of the things that maybe could be the situation here. If we go down a little bit further we can see “Purchases of Property Plan and Equipment (PP&E)” and again this is a negative number so cash paid for new equipment. Well, it looks like Company A is investing in their company they spent seventy thousand dollars of cash ($70,000) on more equipment. Whereas, Company B only spent ten thousand dollars of cash ($10,000) on new equipment, that would be an indication that perhaps Company A sees growth in their future and therefore is investing in more equipment to help be able to have the capacity for this growth. Whereas, Company B maybe they’d like to buy more equipment, maybe they don’t need to buy equipment, you know, it’s hard to say but they only spent ten thousand dollars ($10,000) of cash on their equipment so obviously not really investing in their future and now then the last item. It looks like Company A had five thousand dollars ($5,000) available for purchasing investments, so maybe they’re put a little money into subsidiary or maybe they had some extra cash and just wanted to invest it in the Stock Market or something like that. Whereas, Company B, zero (0) they didn’t have any cash available. So we can see by looking at these Statement of Cash Flow type items that cash received and cash paid is actually painting a different picture. Company A appears to maybe have a lot more going than Company B once we look at what’s going on with their cash. So, obviously this was a fabricated kind of situation here where Company A is made to look a lot better than Company B but hopefully it helps to illustrate the point.

Course Series

This course is included in the following series:

2 CoursesBack to the Basics: Statement of Cash Flows

  1. Introduction to Statement of Cash Flows
  2. Statement of Cash Flows Fundamentals
Learning Objectives
  • Acquire knowledge of the purpose of the Statement of Cash Flows
  • Contrast the usefulness of the Statement of Cash Flows with the Income Statement and Balance Sheet
  • Examine the Operating, Investing and Financing sections of the Statement of Cash Flows
  • Describe the Indirect method for preparing the Operating Section of the Statement of Cash Flows
  • Demonstrate the process in preparing a Statement of Cash Flows
Last updated/reviewed: August 26, 2023
88 Reviews (318 ratings)

Reviews

5
Anonymous Author
This was a great refresher for me --The instructor was excellent in getting the concepts across and his illustrations were very helpful in understanding the concepts. This course was very practical and gave me a greater understanding of the statement of cash flows and how to prepare it.

5
Member's Profile
This was a great into course or review course for the statement of cash flows. It's really one of the most useful financial statements for management and this course did a great job at giving an overview of how to prepare/read it.

5
Anonymous Author
This course was a great review course for the subject. I believe the instructor covered the topic in an interesting and yet effective manner. I especially liked the worksheet used to categorize the changes for the 3 sections.

5
Anonymous Author
Very simple but informative refresher on the SCF and the Indirect method. The instructor walked through the preparation of an actual statement which I found very useful and made the material more interesting.

5
Anonymous Author
Good course! This course is good for those who want to get a basic knowledge of Statement of Cash Flows. The instructor uses a simple example to explain the concept. Easy to understand and follow.

4
Anonymous Author
Nice explanation of The Statement of Cash Flows. Tells us about the purpose of the CFS, the elements of the CFS, and how to prepare a CFS. Nice course to understand the fundamentals of the CFS.

5
Anonymous Author
This course was a great refresher course on the Statement of Cashflows. Getting to review and differentiate between the direct and indirect approach was clearly illustrated by Professor Slayter.

5
Anonymous Author
Instructor was very knowledgeable and provided examples related to the subject matter. As the instructor mentioned, the course is suitable for someone with working knowledge of the subject.

5
Anonymous Author
The course is an excellent overview of cash flow statement. It does a good job explaining the sections and gives a great example of how to calculate. The teacher does a good job overall

4
Member's Profile
A bit confusing, but that is not Prof. Slayter's fault. The Statement of Cash Flows, in and of itself, is confusing. In fact, he does a fairly good job teaching this difficult topic.

4
Member's Profile
Love cash flow statements! This course is a great refresh for anyone that needs to get up to date on the statement of cash flows. Will help in preparation of the statement.

5
Anonymous Author
Great review of cash flow basics. Appreciated the interactive nature of the presentation which was much more interesting than just listening to someone read the slides : )

2
Member's Profile
Nice, basic introduction to the Statement of Cash Flows. Handwriting examples should be recreated. Overall worth the time. Certainly, the final exam causes confusion.

5
Member's Profile
good and concise presentation of the least understood of the three accounting statements. Nice job of conceptualizing the indirect method as well. Overall recommend.

Anonymous Author
Great course that is easy to follow and understand! Would have liked to see a workbook that we could use to reinforce the concepts taught and prepare for the exam

5
Anonymous Author
Very informative course. As i am moving into a different accounting role in my company i found this class a great refresher on the statement of cash flows.

5
Anonymous Author
Excellent refresher on cash flow preparation. Following along in the preparation of an actual cash flow statement was an excellent training method.

5
Anonymous Author
You explained this better than my intermediate accounting 1 textbook. Thank you for making cash accounting much easier to understand.

5
Anonymous Author
Very clear explanation of a Statement of Cash Flows. Presentation and development of the Statement of Cash Flows was easy to follow.

5
Anonymous Author
Yep, another good lecture. I appreciated the content. Always good to revisit the cash flow statement. Thanks to the lecturer.

5
Anonymous Author
Financial statements are always a worth learning topic whether it be a introductory course. Nicely presented and explained .

5
Member's Profile
I really enjoyed this course with Erik Slayter. He breaks the statement of cash flows in a very easy to understand format.

5
Anonymous Author
Solid course, best for beginners. Individuals with more advanced accounting skills will feel that the course is a bit slow.

4
Anonymous Author
The fundamental and basic cash flow concepts and example. Would be helpful for folks to try to have a basic understanding.

3
Anonymous Author
The video was solid and I learned a lot about the statement of cash flows. The final exam is good, short and to the point.

5
Anonymous Author
Instructor was very clear in presentation and information. Course was informative and met the need of the participant.

5
Anonymous Author
This was a good introductory course on statement of cash flows. It taught the basics as well as the indirect method.

5
Excellent simplified explanations to a financial statement not very well understood by both investor or accountant.

5
Anonymous Author
Nice over view of Statement of Cash Flows. Source materials did a good job of helping meet the course objectives.

4
Anonymous Author
This was a good refresher course for those that do not deal with the statement of cash flows on a regular basis.

4
Anonymous Author
The professor was easy to understand and follow. Nice to work along with the course with provided worksheets.

4
Anonymous Author
Good basic course on the statement of cash flows. The examples were good and easily understood.

4
Anonymous Author
Nice overview of the statement of cash flows. recommended if you are not familiar with the SCF!

5
Member's Profile
Quick refresher on the statement of cash flows. This is good information and easy to follow.

3
Anonymous Author
Wow thank you so much this really is a heaven-sent piece of educational material right here

5
Anonymous Author
Helpful course on a statement that I put together monthly but needed to learn more about.

5
Anonymous Author
Clean and concise lecture. Love the straight forward approach to teaching the cf concept

5
Member's Profile
I love the exercise to convert the Net Income statement into the statement of cash flow.

5
Anonymous Author
The explanation is extremely clear. Easiest way to understand indirect cash flow method.

5
Member's Profile
Really great class that helped me understand the statement of cash flows much better!

4
Member's Profile
Straight forward example of Cash Flows. Good instruction to work through the example.

4
Anonymous Author
This is a good course for those with little exposure to the statement of cash flows.

5
Member's Profile
very well put together and covers it all thanks...................................

4
Member's Profile
This course was a great review as I haven't worked with these statements in a while

5
Member's Profile
does a great job presenting complex concepts in a simple easy to understand manner.

5
Anonymous Author
Good refresher course with helpful worksheet for creating SCF. Engaging instructor.

4
Anonymous Author
simple lecture on cash flow. easy to understand particularly for non-accountants

3
Member's Profile
A reasonably good course with informative material well-suited for the purpose.

5
Anonymous Author
- The content covered helped us strengthen base knowledge of cash flow concepts

4
Anonymous Author
Great refresher course on the concepts related to the Statement of Cash Flows.

5
Anonymous Author
helpful additional materials for reference like slides, practice problems, etc

4
Anonymous Author
Best and simplest explanation of Indirect Cash Flows method that I have seen.

5
Anonymous Author
Foundational course on the cash flow statement, good intro level course.

5
Anonymous Author
It helped me a lot to understand cashflow basics and what to look for!

5
Member's Profile
Informative, good for first time preparers of statement of cash flows

Member's Profile
A bit slow in general and the approach was not intuitive or helpful

3
Member's Profile
Explains cash flow statement in details. Good presentation material

5
Anonymous Author
Well presented, easy to follow, not dull. Informative and relevant.

5
Anonymous Author
Great quick refresher of the basics of the statement of cash flows.

5
Anonymous Author
This was a good basic introduction to the statement of cash flows.

4
Anonymous Author
simple but clear examples. good overvie to more complex review.

5
Member's Profile
Loved this course. It was nice to follow along with an example.

5
Anonymous Author
This course was very informative. I enjoyed the presentation.

5
Anonymous Author
Good review and overview of the statement of cash flows.

5
Anonymous Author
I have learned a lot of good techniques from this class.

5
Anonymous Author
This was a great course by breaking down the basics.

4
Anonymous Author
A manageable review of the Statement of Cash Flows !!

4
Anonymous Author
excellent basic presentation of Cash Flow Components

5
Anonymous Author
Erik should do more courses. Very clearly explained.

4
Anonymous Author
Same presentation as another cash flow CPE session.

3
Anonymous Author
Very basic & good lesson. simple to understand!

5
Anonymous Author
Effective presentation. Very easy to listen to.

5
Member's Profile
Great course! Very informative and helpful.

5
Member's Profile
Very good and clear example. Thank you.

4
Member's Profile
Should teach the direct approach as well

4
Anonymous Author
Simple easy to understand explanations.

5
Anonymous Author
Very nice overview. Very well done.

4
Anonymous Author
Good review but a little basic.

5
Anonymous Author
Great detailed explanation.

5
Member's Profile
Liked the hands on example.

5
Member's Profile
sweet course, so so sweet

4
Member's Profile
Easy to understand

4
Anonymous Author
I've learned a lot

5
Member's Profile
met my objective

5
Member's Profile
good material

5
Anonymous Author
Helpful class

5
Anonymous Author
Good review

5
Anonymous Author
Excellent.

Prerequisites
Course Complexity: Foundational
  • Basic Financial Accounting knowledge
  • Basic understanding of the Income Statement and Balance Sheet
Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Questions and Answers(3 Questions)
User picture

Hello,
I thought this course counted towards CPE for CPAs but I can't print the certificate. Does this count for CPAs?

Thanks

Member's Profile

This course does not qualify for CPE b/c NASBA does not allow what they consider truly fundamental accounting courses to provide CPE credit. It's a rare accounting course that does not offer CPE. We have over 1,000 CPE hours available in other courses, and you can find them by using the CPA filter in our main course library page under the Certification Interest filter on the left-hand side.

User picture

Can you confirm this course does not qualify for CPE credit for CPAs as stated above? I was able to create a 1 CPE credit certificate on 5/3/23.

If this is truly not allowed for CPE why it is not flagged as such? Is there a list or designation that would help me avoid this issue in other courses?

Instructor for this course
Course Syllabus
INTRODUCTION AND OVERVIEW
  Introduction to Statement of Cash Flows10:46
The 3 Sections
  Sections of the Statement of Cash Flows11:32
  Operating Section8:56
  Operating and Investing Sections6:46
  Investing and Financing Sections; Completing the Statement of Cash Flows12:23
Continuous Play
  Introduction to Statement of Cash Flows50:23
SUPPORTING MATERIALS
  Slides: Statement of Cash FlowsPDF
  Statement of Cash Flows Glossary/IndexPDF
  Work Sheet: Statement of Cash FlowsPDF
  Cali Company .xlsx file (optional)XLSX
REVIEW & TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam