The cash flow statement makes adjustments to the information recorded on your income statement, so you see your net cash flow-the precise amount of cash you have on hand for that time period.įor example, depreciation is recorded as a monthly expense.
So, even if you see income reported on your income statement, you may not have the cash from that income on hand.
(The cash accounting method only records money once you have it on hand. If you use accrual basis accounting, income and expenses are recorded when they are earned or incurred-not when the money actually leaves or enters your bank accounts. While income statements are excellent for showing you how much money you’ve spent and earned, they don’t necessarily tell you how much cash you have on hand for a specific period of time. A cash flow statement is a regular financial statement telling you how much cash you have on hand for a specific period.
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