| Definition |
Financial statement showing actual inflows and outflows of cash over a period. |
Snapshot of a company's financial position (assets, liabilities, equity) at a specific date. |
| Purpose |
Tracks liquidity and cash management. |
Shows overall financial health and solvency. |
| Time Frame |
Covers a period (e.g., monthly, quarterly, yearly). |
Represents a specific point in time (e.g., 31st March). |
| Major Sections |
Operating, investing, and financing cash flows. |
Assets, liabilities, and shareholders’ equity. |
| Focus |
Focuses on cash movements. |
Focuses on balances and valuations. |
| Non-Cash Items |
Excludes non-cash transactions like depreciation, stock-based compensation. |
Includes non-cash assets and liabilities. |
| Usefulness |
Helps assess liquidity and short-term financial viability. |
Helps assess long-term financial strength and capital structure. |
| Prepared Using |
Cash-based accounting or indirect/direct method. |
Accrual-based accounting system. |
| Regulatory Requirement |
Mandatory for listed companies under accounting standards. |
Mandatory part of financial statements. |
| Frequency |
Prepared periodically (monthly, quarterly, annually). |
Prepared at the end of an accounting period. |
| Liquidity Indicator |
Strong indicator of actual cash available. |
Shows liquidity indirectly through current assets and liabilities. |
| Financial Position |
Shows changes in cash and cash equivalents. |
Shows net worth and how assets are financed. |
| Interrelation |
Explains changes in cash reported on the balance sheet. |
Cash shown here is explained by the cash flow statement. |
| Example Entry |
Cash received from customers or paid for equipment. |
Machinery worth ₹10 lakh or loan payable of ₹5 lakh. |
| Performance Insight |
Gives insight into operational efficiency and liquidity. |
Gives insight into overall financial stability and leverage. |
| Stakeholder Use |
Useful for creditors and short-term decision-making. |
Useful for investors and long-term decision-making. |
| Changes Tracked |
Tracks movement of cash and equivalents. |
Tracks balances of financial components. |
| Includes |
Only cash-based items. |
Both cash and accrual-based items. |
| Reconciliation |
Starts with net income and adjusts to cash (indirect method). |
No reconciliation process required. |
Cash Flow Statement vs Balance Sheet