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Detailed Steps in Preparing a Statement of Cash Flows

A List of Steps in Cash Flow Statement Preparation

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There are essentially three steps in developing the Statement of Cash Flows. You have to learn to develop a balance sheet. Then, you have to develop two years of balance sheets for your company. From those comparative balance sheets comes the Statement of Cash Flows.

1. Learn to Develop a Balance Sheet

In order to begin the development of the Statement of Cash Flows, you first have to learn how to develop a balance sheet. This article gives you a step by step tutorial on how to develop a balance sheet for a company.

2. Learn to Develop Comparative Balance Sheets

In order to develop a Statement of Cash Flows, you need two years of balance sheet data. Why? Because you are looking for changes in balance sheet and some income statement accounts. The Statement of Cash Flows is all about changes in the company's cash position as indicated on the balance sheets between two years plus the effects of net income and depreciation.

This set of comparative balance sheets connects directly to the next step - the development of the Statement of Cash Flows.

3. Use the Comparative Balance Sheets to Develop the Statement of Cash Flows

Print out the comparative balance sheets to look at as you look at the development of the Statement of Cash Flows in this article.

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