Quick answer
The cash flow statement reports cash inflows and outflows during a period, classified as operating, investing, or financing activities. It reconciles beginning and ending Cash, with ending Cash agreeing to the balance sheet.
The cash flow statement is also called a statement of cash flows. It reports when cash was received or paid. Credit transactions affect cash when the related receivable or payable is settled. Depreciation itself never becomes a cash flow; under the indirect method, it is added back only when reconciling accrual profit to operating cash flow.
Three ways cash changes
- Operating activities
- Cash receipts and payments from the entity’s main revenue-producing activities, such as customer receipts and operating payments.
- Investing activities
- Cash paid to acquire, or received from selling, long-term assets and other investments. Maple’s equipment purchase is the March example.
- Financing activities
- Cash flows that change borrowings or contributed equity, such as proceeds from issuing shares or repayment of loan principal. Maple’s $50,000 share issue is its March financing inflow.
Maple Tech’s March cash flow statement
| Line item | March 2026 |
|---|---|
| Operating Activities | |
| Cash received from customers | 6,000 |
| Cash paid for rent | (1,500) |
| Net Cash from Operating Activities | 4,500 |
| Investing Activities | |
| Cash paid to acquire equipment | (12,000) |
| Net Cash used in Investing Activities | (12,000) |
| Financing Activities | |
| Cash received from issuing common shares | 50,000 |
| Net Cash from Financing Activities | 50,000 |
| Net Increase in Cash | 42,500 |
| Cash, beginning of March | 0 |
| Cash, March 31 | 42,500 |
The $42,500 ending amount agrees exactly with the Cash account and Maple Tech’s balance sheet. The $2,400 supplies purchase is absent because it remains unpaid. The $1,000 accrued service and $200 depreciation are also absent because neither moved cash in March.
From $3,800 profit to $4,500 operating cash
The direct presentation above lists operating cash receipts and payments. An indirect bridge reaches the same $4,500 by starting with accrual profit and adjusting for depreciation and changes in Accounts Receivable, Supplies, and Accounts Payable. These are commonly described as non-cash and working-capital timing effects:
| Line item | Amount |
|---|---|
| March profit | 3,800 |
| Add: Depreciation | 200 |
| Less: Increase in Accounts Receivable | (1,000) |
| Less: Increase in Supplies | (900) |
| Add: Increase in Accounts Payable | 2,400 |
| Net Cash from Operating Activities | 4,500 |
Direct presentation
Shows major operating cash receipts and payments. Maple’s $6,000 customer receipt less $1,500 rent payment gives $4,500.
Indirect presentation
Reconciles accrual profit to operating cash flow. Both presentations report the same $4,500 result, but they arrive there differently.
Some cash flows require specific classification
Interest, dividends, income tax, foreign currency, and non-cash financing do not arise in Maple’s example. When they do, their classification depends on the applicable framework and reporting period.
No cash flow does not mean no accounting effect
The accrued service increases March revenue and Accounts Receivable. Depreciation increases March expense and Accumulated Depreciation. Both matter to the accrual statements even though neither is a March cash flow.
See Accrual Accounting for the timing logic and How the Financial Statements Connect for the cross-statement view. Continue to Closing Entries and the Next Period.