The statement of cash flows has four distinct sections:
Cash involving operating activities
Cash involving investing activities
Cash involving financing activities
Assuming that the cash flow statement is being prepared using the indirect method (the method used by most companies) the differences in a company's balance sheet accounts will provide much of the needed information. For example, if the statement of cash flows is for the year 2012, the balance sheet accounts at December 31, 2012 will be compared to the balance sheet accounts at December 31, 2011. The changes—or differences—in these account balances will likely be entered in one of the sections of the statement of cash flows.
Shown below is each of the four sections of the statement of cash flows, followed by a list of those balance sheet accounts which affect it.
1. Cash Provided From or Used By Operating Activities
This section of the cash flow statement reports the company's net income and then converts it from the accrual basis to the cash basis by using the changes in the balances of current asset and current liability accounts, such as:
Other Current Assets
Notes Payable (generally due within one year)
Payroll Taxes Payable
Income Taxes Payable
Other Current Liabilities
In addition to using the changes in current assets and current liabilities, the operating activities section has adjustments for depreciation expense and for the gains and losses on the sale of long-term assets.
2. Cash Provided From or Used By Investing Activities
This section of the cash flow statement reports changes in the balances of long-term asset accounts, such as:
Furniture & Fixtures
In short, investing...