Chapter 1 — Foundations & The Accounting Equation

Cash-Flow Map

Learning Outcome Covered: 1.5a

Master the Statement of Cash Flows (SCF) format

🎯 Objective

Build a correctly formatted Statement of Cash Flows by placing structural elements in the right order. Learn the proper format including the period header, the three activity sections (Operating, Investing, Financing), section subtotals, and the cash reconciliation.

📋 How to Play
  1. Click a puzzle piece to select it
  2. Click a slot in the blueprint to place it
  3. Watch the Statement of Cash Flows build in real-time
  4. Avoid distractor pieces that do not belong
  5. Earlier rounds have pre-placed anchors to guide you
⭐ How stars work: more stars = a better result. 3 stars = no mistakes at all.

Statement of Cash Flows Format

The Statement of Cash Flows Structure

The Statement of Cash Flows (SCF) explains how a company's cash balance changed over a period of time. Every cash inflow and outflow is sorted into one of three activity sections:

Operating + Investing + Financing = Net Change in Cash

Why "For the Period Ended", not "As of"

Important: The Statement of Cash Flows uses "For the [Period] Ended [Date]" because it covers a span of time — like the Income Statement. The Balance Sheet, by contrast, uses "As of [Date]" because it shows a single point in time. Cash flows are summed across many days; balances are snapshots.

The Three Activity Categories

Operating Activities

Cash from day-to-day business: customer collections, payments to suppliers, salaries, interest, taxes.

Investing Activities

Cash for long-term assets: buying or selling equipment, buildings, and investments.

Financing Activities

Cash from owners and lenders: issuing stock, paying dividends, borrowing or repaying loans.

The Complete Structure

COMPANY NAME
Statement of Cash Flows
For the Year Ended [Date]

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers......$X,XXX
Cash paid to suppliers..........(X,XXX)
Net Cash from Operating Activities........$X,XXX

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment..........(X,XXX)
Net Cash from Investing Activities......(X,XXX)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan...............$X,XXX
Dividends paid..................(X,XXX)
Net Cash from Financing Activities......$X,XXX

NET INCREASE/(DECREASE) IN CASH.....$X,XXX
Cash, Beginning of Period...........$X,XXX
Cash, End of Period.................$XX,XXX

Worked Example — A Full Year

Lumina Devices, Inc. — For the Year Ended March 31, 2024:

  • Net Cash from Operating Activities: +$84 million
  • Net Cash from Investing Activities: +$5 million (sold more investments than it bought)
  • Net Cash from Financing Activities: −$91 million (dividends + share buybacks + debt repayments)
  • Net Decrease in Cash: −$2 million
  • Cash, Beginning of Period: $26 million → Cash, End of Period: $24 million

Notice the reconciliation always ties out: Beginning Cash + Net Change = Ending Cash. That ending cash is the same number you'll see in the Cash line on the Lumina Devices Balance Sheet at year-end — the SCF and BS articulate.

The Key Elements

Header Elements

Company name, "Statement of Cash Flows", and "For the Period Ended [Date]"

Main Sections

OPERATING, INVESTING, and FINANCING activities — always in that order

Section Subtotals

Net Cash from each activity section

Net Change in Cash

The sum of the three section subtotals

Cash Reconciliation

Beginning Cash + Net Change = Ending Cash

Common Mistakes to Avoid

  • Wrong date format: "As of [Date]" is for the Balance Sheet, not the SCF. The SCF covers a period.
  • Wrong section order: Operating always comes first, then Investing, then Financing.
  • Balance Sheet items: "ASSETS", "LIABILITIES", and "Total Equity" do not belong on the Statement of Cash Flows.
  • Missing reconciliation: The SCF must end with Beginning Cash + Net Change = Ending Cash.
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SCF Easy
Build the Statement of Cash Flows by placing elements in the correct order.
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Completed Statement of Cash Flows

This is how it looks in standard accounting format

Cash Reconciliation Verified

$0 + $0 = $0 ✓

This is the standard format you'll see in textbooks and real financial reports.

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