ABSTRACT
This chapter discusses the place of cash in a business, while at the same time differentiating profits from cash. It provides the rules in the establishment of the cash flow statement. The chapter explains the worked example of the cash flow statement using one of the well established methods. Companies can only survive if they have enough cash in hand to be able to take care of all their expenses. Cash and cash equivalents form the most basic business resource and without them, transactions would be very difficult to complete. Investing activities are generally much easier to deal with as they affect the balance sheet and the cash flow in the same way. The direct method requires bringing together the beginning cash level to the ending cash level. The cash flows can equally be determined using a worksheet for each major account and by eliminating the effects of accrual basis accounting.
