Date:15.09.2017, 14:58 What we really need, to help throw some light on to the cash situation, is some form of statement which shows us exactly where the cash has come from during the year, and exactly what we have done with it. We also show what the assets, capital and liabilities are at a given date by drawing up a balance sheet. Although the balance sheet shows the cash balance at a give date, it does not show us how we have used our cash funds during the accounting period. For any business it is important to ensure that: Sufficient profits are made to finance the business activities. Sufficient cash funds are available as and when needed. We ascertain the amount of profits in a profit and loss account. Steps in Preparing Statement of Cash Flows. Statement of Cash Flows - Direct Method Statement of Cash Flows - Indirect Method Direct versus Indirect Method of Cash Flows. In addition it has taken on quite a few extra customers who are not creditworthy and such sales may result in bad debts in future. Statement of cash flows can help to signal the development of such problems.
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