---
title: "What is cash flow statement?"
description: "Cash Flow Statement explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/cash-flow-statement/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is cash flow statement?

Glossary

A cash flow statement is a financial statement showing the cash a business generated and used during a period, grouped into operating, investing and financing activities, separate from the profit figure shown on the income statement.

Updated September 2026

## How cash flow statement works

Operating activities show cash from day-to-day business, starting with net income and adjusting for non-cash items like depreciation and changes in receivables, payables and inventory levels. Investing activities show cash spent on or received from long-term assets like equipment, and financing activities show cash from loans taken out, owner contributions or distributions paid out.

A business can be profitable on its income statement while still running low on cash, often because of growing receivables or a large equipment purchase during the period, which is exactly what the cash flow statement is built to reveal. Reviewing it alongside the income statement gives a fuller, more honest picture than either report offers on its own.

## Example

A business reports $23,000 net income for the quarter, but its cash flow statement shows only $9,000 cash from operating activities, because accounts receivable grew by $18,000 as sales increased faster than collections came in. After a $5,000 equipment purchase under investing activities and a $3,000 loan repayment under financing activities, cash actually decreased by $1,000 for the quarter despite the reported profit on paper.

## Cash Flow Statement in QuickBooks Online vs Xero

QuickBooks Online Advanced includes a Statement of Cash Flows report generated automatically from posted transactions with no manual work. Xero produces a Statement of Cash Flows report as well, alongside short-term cash flow projections that estimate cash position over the coming weeks.

## Common mistakes

- A business assumes profit on the income statement means it has plenty of cash, missing a cash flow statement that would show receivables quietly tying up that profit.
- Non-cash items like depreciation are left out of the operating activities adjustment, producing a cash flow statement that does not actually reconcile to net income.
- Financing activities, like a loan draw or owner distribution, are mixed in with operating cash flow, obscuring where the business's cash genuinely came from.

## Why it matters

A cash flow statement reveals whether a profitable business is actually generating cash or just accumulating unpaid invoices, which is exactly the gap that catches many growing businesses off guard. For owners and finance managers, understanding this difference is critical to avoid running short of cash for payroll or supplier payments despite looking profitable on paper. Lenders also rely on it to judge whether a business can genuinely service debt from its own operations.

## Related terms

- [Balance Sheet](https://ledgerbpo.com/glossary/balance-sheet/)
- [Income Statement](https://ledgerbpo.com/glossary/income-statement/)
- [Cash Basis Accounting](https://ledgerbpo.com/glossary/cash-basis-accounting/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles cash flow statement

We prepare a cash flow statement alongside your balance sheet and income statement each period, so you can see not just whether the business is profitable but whether it is actually generating real cash as well.

[Reports your lender, investor and you will actually read](https://ledgerbpo.com/services/financial-reporting/)

Next step

## Books closed. Invoices paid. Every month.

Tell us what is going on with your books or billing. You will hear from a named person within 1 business day, with a custom quote and a plan for the first close.

- Reply from a named person within 1 business day
- No setup fee, month-to-month
- Your software, your data, no lock-in

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[Get a custom quote](https://ledgerbpo.com/get-a-quote/) [Book a 20-minute call](https://ledgerbpo.com/book-a-call/) Or call [+1-657-777-0006](tel:+16577770006) during US, UK or Australian business hours.

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Source: https://ledgerbpo.com/glossary/cash-flow-statement/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt