What are the requirements for preparing cash flow statement?
Preparing a cash flow statement typically involves several requirements and steps:
Financial Data: Gather financial information, including the income statement and balance sheet, for the period you want to create the cash flow statement (usually monthly, quarterly, or annually).
Cash Flow Categories: Identify and categorize cash flows into three main categories: operating activities, investing activities, and financing activities.
Operating Activities:
Start with net income from the income statement.
Adjust for non-cash expenses (e.g., depreciation, amortization).
Add back any decreases in current liabilities and subtract any increases in current assets.
Subtract any decreases in current assets and add back any increases in current liabilities.
Investing Activities:
List cash flows related to buying and selling long-term assets (e.g., property, equipment, investments).
Subtract cash spent on investments and add proceeds from asset sales.
Financing Activities:
Include cash flows related to borrowing and repaying debt.
List cash received from issuing stock and any dividends paid to shareholders.
Subtract debt repayments and stock buybacks.
Net Cash Flow: Sum the cash flows from operating, investing, and financing activities to calculate the net cash flow for the period.
Opening and Closing Cash Balances: Determine the opening and closing cash balances by adding or subtracting the net cash flow from the previous period's closing cash balance.
Reconciliation: Ensure that the opening cash balance plus net cash flow equals the closing cash balance.
Presentation: Prepare the cash flow statement in a standardized format, with the operating, investing, and financing activities clearly outlined.
Additional Disclosures: Include any additional information or disclosures required by accounting standards or regulatory authorities.
Remember that the specific requirements and format may vary depending on your jurisdiction and accounting standards (e.g., Generally Accepted Accounting Principles or International Financial Reporting Standards). It's advisable to consult with a qualified accountant or financial professional to ensure compliance with relevant guidelines and standards.
