Question

Of what use is the statement of cash flows?

Answer 1

A Statement of cash flows is a statement which shows the cash flow in or out of the business during a course of time from various activities namely Operating, Investing and Financing.
Sometimes, a profit and loss a/c may not depict a true picture of entity's operations. e.g If in one year, there are huge amortization costs, P&L a/c would show a loss whereas in reality the business is having positive cash flows during the year.
It also bifurcates the cash flow from various activities. i.e. a high cash inflow during the year may not always mean that the business is doing good. It must be ensured that the bulk of cash inflow is from Operating Activities and not from Investing and Financing Activities.

It is also helpful in finding out the incomes which have accrued but not yet realised in cash. e.g. Credit Sales, Accrued Rent etc.