The statement of cash flows, as its name implies, summarises a company’s cash flows for a period of time. The statement of cash flows explains how a company’s cash was generated during the period and how that cash was used. Even if the statement of cash flows seems to be a replacement for the income statement, the two statements have distinct objectives.
The income statement measures the results of operations for a period of time. Net income is the reporting entity’s best estimate representing a company’s economic performance for a period. The income statement provides details as to how the retained earnings account changed during a period and ties together, in part, the changes in the owner’s equity section … Read more