Cash flow statement

Key takeaways

It tracks real cash movements, not profit.
It's split into operating, investing and financing activities.
It explains why cash rose or fell even when profit says otherwise.
It's the third core statement, alongside the P&L and balance sheet.

What is a cash flow statement?

The cash flow statement reports the cash that actually flowed in and out over a period. Because profit and cash aren't the same (invoices unpaid, stock bought), this statement explains the change in your bank balance in a way the P&L can't.

The three sections

Operating activities are the day-to-day trading cash flows. Investing covers buying or selling assets like equipment. Financing covers loans, repayments and money put in or taken out by owners. Together they reconcile opening cash to closing cash.

Worked example

Opening cash £8,000
+ Operating cash £6,000 − Equipment bought £3,000 − Loan repaid £1,000
= Closing cash £10,000

Frequently asked questions

Why do I need a cash flow statement if I have a P&L?

Because profit doesn't tell you whether you have cash. The cash flow statement shows if the business is actually generating money.

Is it the same as a cash flow forecast?

No. The statement reports the past; a forecast projects the future. Both are useful.

Profit & loss (P&L)Working capital Cash vs accrual basis Balance sheet

Learn more

Source: Investopedia ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.

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