TA 1-4

3. Statement of Cash Flows

Earnings do not typically equal net cash flows, except over the life of a company.

Because accrual accounting yields numbers different from cash flow accounting, and we know that cash flows are important in business decisions, there is a need for reporting on cash inflows and outflows.

The statement of cash flows reports cash inflows and outflows separately for a company’s operating, investing and financing activities over a period of time.

For the purpose of this module, we will only need a basic understanding of the cash flow statement. However, it will become more relevant in “Equity Analysis” in Trimester 3.

4. Statement of Shareholders’ Equity

The statements of retained earnings, comprehensive income and changes in capital accounts are often called the statement of changes in shareholders’ equity.

This statement is useful in identifying reasons for changes in equity holders’ claims on the assets of a company.

For the purpose of this module, we will only need a basic understanding of the statement of changes in equity. However, it will become more relevant in “Equity Analysis” in Semester 2.