Cash Flow Statements

A profit and loss account is an important statement which assists users of accounts in assessing the financial performance of an organisation. It is prepared, as we know, using accounting concepts such as accruals or matching concept. It is important to understand that profit is an accounting concept and does not provide information about the financial liquidity of the organisation. Cash flow is important to the survival of any organisation and accounts should there fore give information concerning these cash flows. This is the objective of the cash flow statement, namely to identify cash flow from operating activities and other cash inflows and outflows and arrive at the increase/decrease in cash during the period.