From an accounting perspective, assets are divided into the following categories:
- current assets (cash and other liquid items)
- long-term assets (real estate, plant, equipment)
- prepaid & deferred assets (expenditures for future costs such as insurance, rent, interest)
- intangible assets (trademarks, patents, copyrights, goodwill)
Accrual Basis Accounting
Cash Flow Statement
It answers the questions:
- Where the money came (will come) from?
- Where it went (will go)?
Cash Flow Statements assess the amount, timing, and predictability of cash-inflows and cash-outflows, and are used as the basis for budgeting and business planning.
The accounting data is presented usually in three main sections:
- Operating activities (sales of goods or services),
- Investing activities (sale or purchase of an asset, for example), and
- Financing activities (borrowings, or sale of common stock, for example).
Together, these sections show the overall (net) change in the firm’s cash flow for the period the statement is prepared.