The cash flow statement is a clear illustration of the physical cash generated and spent by a company during a specific period of time. The statement provides a clear perspective of the cash a company takes in as it compares to the net income, and it allows potential investors to see if a company is bringing in more cash than it is spending. The first section of the cash flow statement, called the operating section, details whether the company is generating cash from day-to-day activities.
The first line of the operating section reflects the actual cash received from customers. This will not necessarily match the figures reported on the income statement, because the income statement operates on the accrual basis. In the cash flow statement, you record only the cash you physically received. Do not include any sales made on credit.
Advertisement Article continues below this adInclude separate lines for any other operating-related income that you may receive. This can include interest income, service fees or even rental payments, depending on the nature of the company's operations. Do not include income from investments or financing activities in this section, because those have their own sections in the statement.