 in this presentation. We will introduce the financial statement of statement of cash flows. When thinking about the statement of cash flows, we want to compare and contrast the reasons for it to what the other financial statements are providing us. Support accounting instruction by clicking the link below, giving 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, 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. What information in other words are we going to get from the statement of cash flows that's not on the other financial statements those being the balance sheet, the income statement, the statement of equity. We're mainly comparing against the income statement because the statement of cash flows going to give us some similar information it's going to give us information over time what's happening over time unlike the balance sheet which is going to have a point in time so we're still looking at at timing what is what is going on over time that's typically our income statement which measures performance. The major goal of the income statement is to measure performance how have we done how much work have we done revenue minus expenses revenue being recognized when we earn the work when we've done the job expenses when we've incurred something in order to help generate in the same time period and that's going to be the net income what that doesn't do however is measure cash flow and when we first learn about the income statement that's going to be a real big distinction we want to look at we want to say okay the income statement's on an accrual basis why because that's better for performance measurement it's better for us to see how much work we did and a cash flow basis doesn't tell us that very well that's why we have to use an accrual basis however cash flow is very important and if we do not report it on the income statement in terms of cash flow then we need the statement of cash flows in order to give us that added information so really the statement of cash flows can be compared in a lot of ways to the income statement it's going to measure performance but it's also going to measure other types of cash flows outside of things that we would think about as income statement type of activities but it's going to be a timing statement and it's going to give us those cash flows so it's going to tell us the sources of cash inflows now of course note that as we work in the company any type of business most things are going to go through cash any cycle whether it be a payable cycle or a revenue cycle is going to deal with cash at some point within the process so cash flow is going to be important and we want to know what the sources of the cash flow are hopefully a lot of it will be from revenue from customers that we're going to have the cash flow but we could have other sources of revenues to us including loans or investments from the owners we want to know the sources of the outflows what are we spending cash on typically we would take expenses inventory but possibly paying down loans and other types of things that they that the cash is going out for and then of course the reasons for change in cash because when we look at the financial statements we're oftentimes going to look at you know what's the bottom line on the income statement what's our net income and we're going to look at the balance sheet and then we're going to look at cash what's changing the cash do we have enough cash for us to you know continue with the operations do we have more than enough cash and possibly we can give out a dividend or draw some money out for personal use so this change in cash not the same thing as net income however very important statement of cash flow will give us that information so that we can have the best of both worlds we can have the income statement given us performance data and we can have the statement of cash flows giving us the cash flow data this is going to be really important it's something that whenever we first start learning the accrual basis often comes to mind when we learn the accrual basis and we learn that we're going to have the income statement reporting revenue when it's earned not necessarily when we get the cash and expenses when they're incurred not actually when we pay them then we often start thinking well that's going to distort things in terms of cash flow because we may be recognizing revenue before we get cash and so we often when learning the accrual basis are asking these questions in terms of what about cash flow isn't that important I need to know what the actual cash flow is and by doing the statement of cash flows we get the best of both worlds because the income statement will measure better the actual performance on an accrual basis that's a better measurement of what we're actually doing and the cash flow statement will give us those cash flows and tell us where the resources of cash are where the cash is coming from where the cash is going what the change in cash is due to so in order to to do this we first then need to think about what is cash now clearly when we think about a company most of time it's going to be the checking account probably the savings account but there could be other types of accounts because we may have more than just one checking account we may have multiple checking accounts we'd have to include all the checking accounts in terms of what cash is going to be and then we've got cash equivalents we could have some things that are going to be highly liquid very close to cash that may be included in cash as well so short term highly liquid investments things that can be converted into cash very quickly possibly would then be cash equivalents and included in our statement of cash flows easily convertible into cash things are going to be changed to cash very easily close to maturity so that the market value is not affected by interest rate changes so if something is really close to maturity then we're going to say okay it's pretty close to cash because it's right next to maturity and therefore we're going to include it in cash on the balance sheet and we're going to be using it within the statement of cash flows to look at the change in cash