 In this discussion, we will discuss the discussion question of Explain how a worksheet can be used to help construct the statement of cash flows So if we see a discussion question like this and we don't know exactly what the worksheet is We could start from just discussing what a statement of cash flows is Support Accounting Instruction by clicking the link below We have given you a free month membership to all of the content on our website broken out by category Further broken out by course Each course then organized in a logical reasonable fashion Making it much more easy to find what you need than can be done on a YouTube page We also include added resources such as Excel practice problems Like PDF files and more like QuickBooks backup files when applicable So once again click the link below for a free month membership to our website and all the content on it And then how to construct it And by doing that we may then pick up some of this information in terms of a worksheet So the statement of cash flows is one of our major financial statements We got the balance sheet, the income statement, statement of equity and statement of cash flows Statement of cash flows is going to be measuring the change in activity that change in cash In three major categories, those being operating, investing, financing Now to put together the statement of cash flows, what do we need? We typically need a comparative balance sheet The balance sheet for the current period and a prior period The income statement and some added information like the GL or something that we can look into For certain type of accounts typically changes in financing and investing activities What's the first step that we're going to do to create the statement of cash flows? Typically we'll make a worksheet from the comparative balance sheet So that's why our worksheet is really going to be helpful That's really what we use, that's our main thing we're going to use Now the comparative balance sheet, we could just take the comparative balance sheet And just subtract out each account and use that as our worksheet But it's nice to have a nice formatted worksheet to create the statement of cash flows Now different people will format the worksheet a little bit different But they'll all have similar characteristics to them At the very least we're going to be taking the balance sheet accounts for the current period The balance sheet accounts for the prior period Putting them side by side And then taking the difference between those two accounts And so that's what we're looking for, we're looking for that difference between the two accounts Now I would recommend converting from a plus and minus format balance sheet To back to more of a debit and credit format Like a post-closing trial balance Removing subcategories, getting rid of all the added stuff you need to do In order to record a balance sheet and get right back to just the numbers, the building blocks Debits and credits And then you'd have the debits and credits for the current period The debits and credits for the prior period and the difference between the two Whether you use a plus and minus format or a debit and credit format You're going to have a worksheet typically will have the current period balances And the balance sheet prior period balances and the difference Why is this important? Why does that help? Well the worksheet then is the primary thing we're going to use to create the statement of cash flows Meaning the difference in cash of course is kind of like the bottom line That's the activity, that's really what we're looking for in the statement of cash flows We're trying to break out that difference in cash, the change in cash What happened over time into three major categories Operating, investing and financing to try to explain the reasons for that change in cash And then all the other changes in the balance sheet accounts are what we're going to use To kind of back into that change in cash So we're going to in essence find a home for all those other balance sheet accounts And that will be a way of us explaining the change in cash So we're going to be able to figure out the change in cash by looking at the differences in all the balance sheet accounts Which seems unusual because the balance sheet account of course is representing what happens as a point in time Whereas the income statement really shows the activity However not on a cash basis but on an accrual basis So you would think we'd be looking at the income statement more But really we're looking at the two points in time on the balance sheet And when we look at the difference between those two points in time We're looking at the change, we're looking at the activity And that change then is what we can use in order to construct the statement of cash flows So what we're going to do is really look through every change on that worksheet And every balance sheet account Find a home for it in one of the three categories Operating, investing, financing And that's going to be the core component that we'll use basically to create the statement of cash flows We're going to need a few extra details outside of that The income statement will provide those as well as some other details like the general ledger To create the statement of cash flows And that's how we'll put the thing together The bottom line on the statement of cash flows is going to be change in cash flows Or not the bottom line but that's really what we're looking for That will tie out to our statement of cash flows which will be useful That's why the worksheet will be useful because it'll tie out to the change And it'll also give us the information needed to get to ending cash as of the end of the time period That amount matching what's on the balance sheet at the ending time period Which can be useful to have a check figure for our statement of cash flows So the worksheet is really going to be the primary tool to simplify the process Make it as easy as possible and give us some check figures to verify that we are doing things correctly