Question

Why do organizations prepare cash flow statements and operating statements?

Answer 1

Cash Flow Statement: Cash flow Statement is an important financial statement that shows the details of the company’s cash flows for an accounting period. Cash Flow statement shows how much cash has been received or paid by a business during its accounting period.

There are many expenses incurred against cash is not paid like depreciation and amortization and others so by preparing the cash flow statement we will know the real cash generation . From this we can know from where the cash flow is generated and where we do the expenses of the cash. So it will be show proper picture of the our cash flow which we cannot determined by the income statement and balance sheet.

Operating Statement: This is also one of the primary or main financial statements and it is used to assess the performance of the any organization because it will show the all revenue and expenses of the organization during the period of reporting.

So all the organization need to prepare their operating statement. Organization will generate the revenue and for the generating this revenue they have to do some expense so in the operating statement it will shows how much we generated from the sales and what is the our expenses and against the operating income . It will also show the how much we have to pay as taxation to government etc.