Cash flow statement template

The cash flows of a business are reported using the statement of cash flows. There are two variations on the template for this report, which are the direct method and the indirect method. The indirect method is used by nearly all organizations, since it is much easier to derive from the existing accounts.

In the statement of cash flows, cash flow information is reported within three separate classifications. The use of classifications is intended to improve the quality of the information presented. These classifications are:

  • Operating activities. These are an entity’s primary revenue-producing activities. Operating activities is the default classification, so if a cash flow does not belong in either of the following two classifications, it belongs in this classification. Operating cash flows are generally associated with revenues and expenses. Examples of cash inflows from operating activities are cash receipts from the sale of goods or services, accounts receivable, lawsuit settlements, normal insurance settlements, and supplier refunds. Examples of cash outflows for operating activities are for payments to employees and suppliers, fees and fines, lawsuit settlements, cash payments to lenders for interest, contributions to charity, cash refunds to customers, and the settlement of asset retirement obligations. 
  • Investing activities. These are investments in productive assets, as well as in the debt and equity securities issued by other entities. These cash flows are generally associated with the purchase or sale of assets. Examples are cash receipts from the sale or collection of loans, the sale of securities issued by other entities, the sale of long-term assets, and the proceeds from insurance settlements related to damaged property. Examples of cash outflows from investing activities are cash payments for loans made to other entities, the purchase of the debt or equity of other entities, and the purchase of fixed assets (including capitalized interest).
  • Financing activities. These are the activities resulting in alterations to the amount of contributed equity and an entity’s borrowings. These cash flows are generally associated with liabilities or equity, and involve transactions between the reporting entity and its providers of capital. Examples are cash receipts from the sale of an entity’s own equity instruments or from issuing debt, and proceeds from derivative instruments. Examples of cash outflows from financing activities are cash outlays for dividends, share repurchases, payments for debt issuance costs, and the pay down of outstanding debt.

The format of the indirect method appears in the following example. Note that the indirect method does not include cash inflows and outflows in the cash flows from operating activities section, but rather a derivation of cash flows based on adjustments to net income.

Puller Corporation
Statement of Cash Flows
For the year ended 12/31/20X3

Cash flows from operating activities

 

 

Net income

 

$3,000,000

Adjustments for:

 

 

   Depreciation and amortization

$125,000

 

   Provision for losses on accounts receivable

20,000

 

   Gain on sale of facility

-65,000

 

 

 

80,000

   Increase in trade receivables

-250,000

 

   Decrease in inventories

325,000

 

   Decrease in trade payables

-50,000

 

 

 

25,000

Cash generated from operations

 

3,105,000

 

 

 

Cash flows from investing activities

 

 

   Purchase of fixed assets

-500,000

 

   Proceeds from sale of equipment

35,000

 

Net cash used in investing activities

 

-465,000

 

 

 

Cash flows from financing activities

 

 

   Proceeds from issuance of common stock

150,000

 

   Proceeds from issuance of long-term debt

175,000

 

   Dividends paid

-45,000

 

Net cash used in financing activities

 

280,000

 

 

 

Net increase in cash and cash equivalents

 

2,920,000

Cash and cash equivalents at beginning of period

 

2,080,000

Cash and cash equivalents at end of period

 

$5,000,000