How to Check the Statement of Cash Flow Is Correct?

The statement of cash flows is one of a company’s main financial statements. It shows the movement of cash in and out of a company and the overall change in a company’s cash balance during an accounting period. The difference between the total cash inflows and cash outflows on the statement of cash flows equals either a net increase or net decrease in your company’s cash balance on its balance sheet between two periods. You can verify the accuracy of your statement of cash flows by matching the change in cash to the change in cash on your balance sheets.

Find the line item that shows either “Net Increase in Cash” or “Net Decrease in Cash” at the bottom of your company’s most recent statement of cash flows.

Determine the dollar amount of the line item. The amount of a net decrease is in parentheses; the amount of a net increase is not. For example, if your statement of cash flows shows “Net Increase in Cash $30,000,” the company’s cash balance grew by $30,000 over the accounting period.

Find the amount of your company’s cash balance in the “Assets” section of its most recent balance sheet and the previous accounting period’s balance sheet. In this example, assume your most recent balance sheet shows $100,000 in cash and that your previous period’s balance sheet shows $70,000 in cash.

Subtract the previous period’s cash balance from the most recent period’s cash balance to determine the change in cash. A positive amount represents a net increase, while a negative amount represents a net decrease. In this example, subtract $70,000 from $100,000 to get $30,000, which represents a net increase in cash.

Compare the change in cash figure with your net increase in cash or net decrease in cash from your statement of cash flows. If the results are the same, the statement of cash flows is correct. If they are different, there may be an error on the statement of cash flows.

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