How does the statement of cash flows explain the reasons for the change in cash between balance sheet dates?
THE STATEMENT EXPLAINS THE REASONS FOR THE CHANGE IN CASH BETWEEN BALANCE SHEET DATES
The last few lines of each statement of cash flows report the amount of cash on each firm's balance sheet at the beginning and the end of each period. Both U.S. GAAP and IFRS require that the statement of cash flows explain changes in cash and cash equivalents. Cash
equivalents represent short-term, highly liquid investments in which a firm has temporarily placed excess cash. We use the term cash flows to refer to flows of both cash and cash equivalents.
The remaining lines on the statements of cash flows show the inflows and outflows of cash during the period to explain the net change in cash between the two balance sheet dates. Thus, the statement of cash flows reports flows, or changes in cash over time, whereas the balance sheet reports amounts of cash at a single moment.
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