A cash flow statement is a document that shows how much cash (or cash equivalents) comes into a business and how much goes out. A cash flow statement is considered a necessary companion to an income statement and a balance sheet when evaluating the financial condition of a business. A cash flow statement can be presented in several different formats. However, complete, concise and clear disclosure of the movement of cash is the only true requirement for a cash flow statement.

Cash flow statements commonly cover periods of one year or more, with more or less detail, depending on the intended use of the cash flow statement. This example of a first-quarter cash flow statement for a new construction company, has been made very simple to illustrate the principles and components of the cash flow statement.

Gather the records you will need for your cash flow statement.

Verify that your ending cash balances for each accounting period agree with your reconciled bank statements.

Set up your spreadsheet for your cash flow statement. Open a new file in your spreadsheet program and give it a name. Example: "Acme Construction, First-Quarter 2010 Cash Flow Statement."

Name the columns of your cash flow statement. Example: Acme Construction First-Quarter 2010 Cash Flow Statement will have five columns with the following headings: (the first column heading is blank, for now), "January," "February," "March," "Net First-Quarter Cash Flow."

Examine your cash accounts and make a list of all sources from which you have received cash during the periods that will be covered by your cash flow statement. Then make a list of all types of cash disbursements for the same periods.

Use the list you prepared in Step 5 to label the rows of your cash flow statement spreadsheet. Cash Receipts will be the first section, Cash Disbursements will be the second section. Each section will have a subtotal. The final row will contain the Net Cash Flow for each period. Example: Acme Construction First-Quarter Cash Flow Statement will have the following row labels: "Cash Received" (a label for the cash receipts section); "Beginning Cash"; "Payments from Customers"; "Loans"; "Contributed Capital"; "Total Cash Received" (a label for the subtotal); "Cash disbursements" (a label for the cash disbursements section); "Salaries"; "Construction Expenses"; "Other Operating Expenses"; "Total Cash Disbursements" (a subtotal for the section); "Ending Cash Balance" (a sum of Beginning Cash, Total Cash Received and Total Cash Disbursements); "Net Cash Flow" (a sum of Total Cash Received and Total Cash Disbursements).

Record your Beginning Cash figures in the appropriate cells of your Cash Flow Statement spreadsheet: Consult your cash account details and find the beginning cash balance for each period that will be reported on your Cash Flow Statement. Record these numbers in the appropriate cells of your Cash Flow Statement. Example, for Acme Construction: Beginning Cash balances obtained from Acme's accounting records are---January, $0; February, $180,000; March, $50,000.

Record and subtotal the cash receipts for each accounting period that will be reported on your Cash Flow Statement: Consult your cash account records and compile totals, per period, for each Cash Receipt category. Record these figures in the appropriate cells on your Cash Flow Statement. Place subtotals for each accounting period In the "Total Cash Receipts" row. Use formulas to figure these sums, so that they will update automatically if you change the data on your spreadsheet.

Example, for Acme Construction: January--Payments from Customers, $50,000; Loans, 150,000; Contributed Capital, $200,000; Total Cash Receipts, $400,000; February--Payments from Customers, $125,000; Loans, $0; Contributed Capital, $0; Total Cash Receipts, $125,000; March-- Payments from Customers, $315,000; Loans, $0; Contributed Capital, $0; Total Cash Receipts, $315,000.

Record and subtotal the Cash Disbursements for each accounting period that will be reported on your Cash Flow Statement: Consult your cash account records and compile totals, per period, for each Cash Disbursement category. Record the totals in the appropriate cells on your Cash Flow Statement. Place subtotals for each accounting period in the "Total Cash Disbursements" row. As in Step 8, use formulas to figure these sums. Example, for Acme Construction: January--Salaries, $80,000; Construction Expenses, $125,000; Other Operating Expenses, $15,000; Total Cash disbursements, $220,000; February--Salaries, $80,000; Construction Expenses, $157,000; Other Operating Expenses, $18,000; Total Cash disbursements, $255,000; March--Salaries, $85,000; Construction Expenses, $185,000; Other Operating Expenses, $18,000; Total Cash disbursements, $288,000.

Compute your Ending Cash Balance for each accounting period: In the row labeled "Ending Cash Balance," record the sum of your Beginning Cash, Total Cash Receipts and Total Cash Disbursements for each accounting period. Once again, use formulas to figure these sums.

Compute your Net Cash Flow for each period that will be reported on your Cash Flow Statement: In the row labeled "Net Cash Flow", record the sum of your Total Cash Receipts and Total Cash disbursements for each accounting period. As in Step 10, use formulas to figure these sums.

Record your Beginning Cash balance for the entire date range covered by your Cash Flow Statement in the last column of your spreadsheet. Example: Acme Constructions Beginning Cash balance for the First Quarter is $0.

In the last column of your Cash Flow Statement, compute the totals for each row. Here again, use formulas to figure these sums. Label this column.

Example: The last column in Acme Construction's Cash Flow Statement is labeled "Net First-Quarter Cash Flow." The calculated figures are "Payments from Customers," $490,000; "Loans," 150,000; "Contributed Capital," 200,000; "Total Cash Receipts," $850,000; "Salaries," $245,000; "Construction Expenses," $467,000; "Other Operating Expenses," $51,000; "Total Cash Disbursements," $763,000.

Save your Cash Flow Statement spreadsheet to your computer. Double-check all your figures for accuracy and print your Cash Flow Statement.

Tip

To check your data accuracy, while compiling your data for Cash Receipts and Cash disbursements, compare your period totals with the associated expense accounts for those periods. If you use the accrual method of accounting, you may find that these totals do not agree, but you can reconcile the totals by determining which expenses have not been paid yet, and which current period payments were for prior period expenses.