 QuickBooks Online 2022 Statement of Cash Flows Get ready because it's go time with QuickBooks Online 2022 Online in our browser searching for QuickBooks Online Test Drive Going into the Test Drive We're looking at the United States version of it And verifying that we're not a robot Sample Company Craig's Design and Landscaping Services Holding Control Scrolling up just a bit to get to that one to five percent We're also going to have the free 30 day trial version open Just so we can look at the business view Comparing it to the accounting view If you don't have access to this That's okay because we're just looking at it for reference purposes at this point Going back to the sample company We're going to open up a few tabs so that we can put reports in them Going to the tab up top Right clicking on it Duplicating the tab Back to the tab to the left Right clicking on it Again duplicating again One more duplication of the duplication process Right clicking on the tab Duplicating it again As those three tabs are thinking We're going to jump back over to the 30 day free trial version Just to note where the reports are located here They're going to be in the business overview section And they are in the reports If you were to change the view to the accounting view Which you can do by going to the cog dropdown Switch to the accounting view You'd have a similar view to what we're looking at in the sample file Which we'll go back to now Sample file We've got the second tab We're going to look at those reports in the accounting view Which is down here on the left hand side We're going to be looking at and focusing in on the statement of cash flows The statement, let's close the hamburger first The statement of cash flows is a major financial statement report But it's not as major or not one that you're going to be using all the time As the balance sheet and the income statement or the profit and loss In other words, you can think of it as something If you were to construct the three financial statement type of reports You would make the balance sheet and profit and loss first And then the statement of cash flows So in that way it's still kind of like a supplemental type of report That you construct after having taken the general financial data Using the reports that you're going to be doing the data input with And creating the major financial statement reports That will be using all of the GL accounts That have activity in them in the balance sheet and in the income statement And then we're going to use that and kind of adjust it a little bit To make the statement of cash flow Which we'll talk about more in a second But it'll be down here in the business overview section We've got all the balance sheet type of reports Then all the income statement type of reports And then we've got the statement of cash flow Hanging out way down here at the bottom Feeling kind of left out at the bottom of the thing down here So we're going to open it back up, scroll up top Let's do a range change up top from 010121 to 123121 Run it And then let's open up our other two reports By going to the tab to the right Going to the reports down on the left hand side Opening up the balance sheet report that gets all the attention Why does it get all the attention says cash flow report Closing the hamburger Let's do a range change up top We're going to take this from 010121 to 123121 Run it And then we'll go to the tab to the right Open up the income statement Also a very famous report that everybody talks about all the time Reports on the left hand side It's got two names even Otherwise known as the profit and loss report Scrolling up range change on that one 010121 to 123121 And run that report So let's close the hamburger Let's just kind of recap what these three reports do real quick The first report is going to be the balance sheet report That reports where we stand as of a point in time Assets, liabilities and equity You could think about equity being the net book value of the company So that's what the owner you can think about It's most kind of concerned with in general The net value of the company Kind of the bottom line of the balance sheet The income statement then is showing us the performance Going back a period of time Typically a month, a quarter or a year And showing us how we got from the prior point The prior balance sheet point That prior place to the current point With regards to the timing accounts Income and the expense accounts So where does the statement of cash flow fit into this The statement of cash flow fits in Because these two accounts are typically Or these two reports are typically reported On an accrual basis process Which means we're reporting revenue Not necessarily when cash is received But instead when we've earned the cash And we're reporting the expenses Not necessarily when cash is paid But when we've incurred the expense So if I go back to the first tab over here Just to look at our dropdown Note that if you're using an invoice You're doing some of the accrual things Because you have a transaction That doesn't have cash related to it And if you're using say a bill form You're doing an accrual kind of thing Because accounts receivable is going to be I mean accounts payable is an accrual type of account No cash related to that transaction Now you might say well I'm on a cash basis method So I don't need the statement of cash flows But even if you're on a cash basis And you might be for example You might be just constructing your entire books From the bank statement from bank feeds And you're using basically a cash basis system You're constructing it from the cash flow That's going through your bank account in that instance However even then there's going to be Some deviations from a strict cash basis For example if you purchase equipment for cash Then you're still going to have to put it on the books As an asset At least for taxes Even the tax code is going to force you To deviate from a cash basis of just Expensing a hundred thousand dollar building For example even if you pay cash for it And if you finance something Now you've got cash flows related to basically A loan and so forth That has cash flow impacts as well So even if you're on a cash basis If you're on a cash basis then Your income statement is going to be more flowing Kind of like a cash basis But even still you're going to have some transactions That are on an accrual basis And the cash flow basis then Will show us just what it would expect to show The cash flow that is happening Now if you're going to do a cash flow basis You would think then you'd say Okay well here's my income statement It's showing basically Income and expenses on an accrual basis Why don't I just reconstruct My income statement in essence To show the cash flows on a cash basis And you could do that And that would be called the direct method Of the income statement Over the cash flow statement But that would only be taken into consideration Like the first component of the cash flow statement Which is usually the biggest component And it's not usually the thing That's going to be required For financial reporting Because even though that makes a lot of sense It doesn't give you a reconciliation Between the accrual basis and the cash basis If I change top to bottom I'm not really reconciling from net income On an accrual basis to a cash basis Therefore most of the time They require financial reporting Often requires a what we call An indirect method Basically a reconciliation of net income On the accrual basis And net income on the cash basis So keeping that in mind Let's jump on over to the statement of cash flows And let's do our same kind of process Here's the whole kind of thing right here Let's try to minimize everything And deconstruct this statement of cash flows So I'm going to minimize everything here And then make it as small as possible And there's the major categories that we have Now note that these major categories that we have Are not, if I go back to the first tab As we saw with the profit loss and the income statement In the accounting section And in the chart of accounts Meaning we're not constructing the statement of cash flows From the items in the chart of accounts As we make financial transactions In the same way that we are basically When we do the balance sheet and the income statement Instead we are constructing the balance sheet And the income statement And then using those statements in essence To create the statement of cash flows So we don't have that direct kind of flow From the transactions to the statement of cash flows Because again we're making the financial statements Of balance sheet and income statement kind of first That's how you would generally think of it There's three categories Operating activities, investing activities And financing activities that we're going to be talking about We're going to look at the cash flows Related to those three activities The biggest one is usually going to be the operating activities And that in essence is what we talked about With the income statement That's the first thing you would think about Well I'm going to take my income statement Convert it from an accrual basis to a cash basis And that would be kind of like my operating activities But instead of doing that from top to bottom I'm going to do it from bottom to top Meaning I'm going to start at net income And deconstruct reconciled To get to the cash on a cash basis That's the operating activities Investing activities are those items That are going to be cash related Basically related to income statement items And those mainly include things like financing equipment Because you got investments into a long term assets That you had to put on the balance sheet For investment type of purposes So investments could mean also investments Like we typically think of them from a financial standpoint Investing in stocks and bonds But usually for a business We're taking into consideration long term investments That we had to put on the books as an asset Instead of an expense Purchases of property, plants and equipment Fixed assets, depreciable assets And then we have the financing activities Which could include the financing of the company Meaning we needed to get money somehow And we get money in order to invest In the assets of the company In order to generate revenue from either the owner Or we get the financing from a loan Or something like that generally So that means that the cash flows down here Are going to be inflows and outflows from the owner If it was a sole proprietorship Would be investments from the owner And if it was a company The inflows would be sales of stock For example, inflows of owner And then the outflows which for a sole proprietorship Would be the draws of the owner And for a partnership for a corporation They would be dividends on the outflows That gives us our net cash increase for the period So this is the change Because this is a performance report Meaning what are my changes What happened from my cash flow From the beginning of the period Same kind of thing as the income statement We're saying where did we start at Where did we stand at the beginning And then this statement is saying What did we do in order to get to the end of the period That's the change So we don't want to leave it at the change Because we want to tie it into the cash flow On the balance sheet Therefore we take that change And we compare it To the ending period At the beginning period cash To get to the ending cash So the bottom line of the statement of cash flows Will tie out to the balance sheet for cash So that 496352 Should tie out to the balance sheet Here, now the balance, it's a little bit tricky Because remember we had that undeposited funds Which they didn't put into the bank account So when you tie this in You gotta say okay I've got Total banking account cash 2901 plus I've got this undeposited funds In it hanging out down here 2062.52 That gives us our 496352 Which is on the statement Of cash flows So it's going to tie out to the balance sheet Okay so let's open this up One by one Operating activities is typically the largest Activity involved We're going to start out at net income So we're not starting Remember if I look at the income statement I'm not taking this from top to bottom Starting out at the revenue line item But I'm taking it from bottom to top And reconciling starting From the net income line So I got the net income starting point And then I take these adjustments Now this is where it gets really confusing To many people And if you're able by the way to construct A statement of cash flows Then you're understanding the accrual concept quite well And we do have some courses on that To look into that But the reason it gets confusing here Is because you're saying okay well You're talking about income statement I'm trying to get down to basically net income On a cash basis you would think then The adjustments would be income statement accounts Revenue and expense accounts Which they would in a direct method But instead we're going to back into The changes the adjustments So what we're going to do is take all of the Differences in the accounts Basically on the balance sheet To basically a transaction On the income statement And we're going to take the difference Between those accounts So in other words if I took the accounts receivable For example on the balance sheet Which represents money that is owed to us For work that we did for a customer Which we have not yet been paid for And I take what people owed us at the beginning Versus what people owed us at the end The difference The change between those accounts Would represent An accrual adjustment That we would need to adjust In order to get back to basically a cash basis So we're kind of backing in To the cash basis By reversing out the accrual components Inventory also Is kind of an accrual thing because When you're tracking the inventory You kind of paid for the inventory And then you put it on the books as an asset Instead of basically like expensing it So once again if I take the difference Between the asset accounts Component I won't get into it in a lot more detail Than that but that's the general idea Accounts payable is the same thing You wouldn't have accounts payable on a cash basis Because you didn't pay It's a non-cash transaction to record accounts payable Because it's making an expense And increasing the liability So if you were to take the difference In accounts payable from the beginning And end of the period You're kind of backing into that accrual transaction Same with the credit card Same with the payable for The taxes State taxes or this is The sales tax And then you've got the loan payable Which I believe this is just the current portion Of the loan payable You would think the loan payable might be In the financing activities here So I won't get into that now But in any case that's going to give us The total adjustments to reconcile Net income to cash And then down here we're going to have The net cash provided by operating activities Which again you could kind of think of As the Kind of net income on a cash basis So notice what we have here If we did the direct method We would basically kind of take revenue And expenses and convert them to a cash basis And we could imagine getting To the same number But we wouldn't have this nice reconciliation Here we have this nice reconciliation Saying here's the net income On the Accrual basis These are all the changes that get us to In essence the net income On a cash basis So then we have the investing Activities if I open them up We've got just and remember This could be investing we often think of As like stocks and bonds which could Be here but usually we're thinking Of investing in a broader term Here we're thinking about any kind of investment In like fixed assets Is the typical category because When we have the business we're usually Getting capital getting money In some way shape or form through the owners Or through the Loans and we're putting them Into the investment of machinery And equipment or something like that That we're going to use to generate revenue So that's usually what's going to be here Is going to be the changes in The property plants and Equipment similar kind of idea You can imagine taking kind of like the difference Between the beginning And ending balance and kind of backing Into the cash flow related to the Investing activities to the Depreciable assets now notice that This cash flow statement On QuickBooks we can get a pretty good Cash flow statement that's in balance as you can See it ties out to the cash on The balance sheet but when you get into more Complex transactions such as Your disposing of equipment That's partially depreciated or something Like that and you're financing Equipment when you're purchasing it You're financing part of it or something You can get into situations where You might have to do some tweaking To really get your cash flow statement Properly reported So keep that in mind But this gives you a good A nice cash flow statement here To start off with at least and then the Financing activities generally your loan Kind of information would be here Notice it took it's taken the Note payable here which is The long term loan and putting it Down here and I think the reason it took Up top is because this was the current The current loan so again The system meaning This is categorized as the Current liability and the system Is saying I'm going to take all the current Liabilities and put them up top In this section operating activities And I'm going to take the long term Liabilities and put them down into financing Which is a good Rule of thumb in general but not Again it might not fit in All scenarios it would be the best Way in all scenarios so Just keep in mind you could have Some differences related to that but you got the financing Related to the notes payable You could also have again if there were draws That were in place here that Could be down here or that would be dividends For a corporation would be the Cash flow in this area Opening balance equity shouldn't really be here Because that's a beginning balance adjustment It's kind of an ugly thing to have in here Because that's kind of like a plug type of Account but in any case then we've got The net cash provided by financing And then the net cash increase Which is going to be Which is going to be these All the three categories together And then we've got The cash at the end Of the period which is the bottom line Also note that you would generally See cash at the beginning Of the period here too but I think This is the first period of operation so There is no beginning period cash So normally you would have to change That to the beginning period cash there is none And so you've got the cash at the end of the period So for example if I looked at this cash flow For just let's say the month Of December 1231 Let's say 120121 And then ran That report So now we've got the cash flow And then we go down here Net cash increase for the period It's negative notice again the terminology Could get a little out of Out of whack here or out of Out of whack because it says Net cash increase for the period And you can see it's a decrease here So that's another thing with the cash flow statements Is often a problem And so when you make a generic cash flow You might instead of saying increase and decrease You might call it change in cash The change in cash That means if it's an increase or decrease You're covered and then change them all To increase or decrease based on Whether there was an increase or decrease But in any case then you've got the cash Right down below So what you're really concerned with Is this change in cash right here That's the activity That's the timing statement that's happening That's what happened during the period But then in order to tie it out To the cash on the balance sheet You're going to add the beginning cash The 53291 Which if I go to the balance sheet here In this case would be as of The end of November So let's say 1101 To 11321 And run it So that's the Well then I've got to add The undeposited funds So let's pull out the trusty calculator So now we've got The 4345.76 Plus The undeposited funds Which is now at the 687.15 And then If I go back to this tab That's the 503291 At the beginning And then And that gets us to that 496352 Which I believe is a familiar number That we saw last time So there we have it And again you can kind of see that This statement whenever you Like talk about the financial statements You're going to say okay the financial statements The balance sheet and the income statement Or profit and loss And someone's going to say well the cash flow statement Is a financial statement as well But usually when you're talking about The journal entries If I go back to the first tab And enter the journal entries Then I'm usually talking about These things that I'm entering These forms which create a financial transaction And I first think about Is that financial transaction constructing My first two financial statements Balance sheet and income statement Correctly and that's why you're always Going to have these two financial statements Open and possibly a trial balance Sheet on top of the income statement And then you think about usually That you're usually then thinking about The statement of cash flows Which is going to be built off of The balance sheet and the income statement And can give you more information Of course related to a very important component Being the cash flow