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Cash Flow

The Cash Flow statement explains why the company's cash went up or down over a period. Profit and cash are not the same: a profitable month can still drain cash when customers pay slowly, when you pay down a loan, or when you buy equipment. The Cash Flow starts from net income and shows each of those differences, grouped into operating, investing and financing activities, until it arrives at the change in your cash accounts.

Before You Begin

  • The figures come from posted transactions on the accrual basis.
  • You need View or Edit access to Reports. See Who Can Use Reports.

Navigation

Reports → Cash Flow.

Step by Step

  1. Open Reports → Cash Flow. It opens for this month to date.
  2. Enter Start and End, for example 07/01/2026 and 09/30/2026, or click a Report period button (This Month, Last Month, This Fiscal Year, Last Fiscal Year).
  3. Click Run Report.

The Cash Flow has no other options: one Total column, always on the accrual basis.

Reading the Cash Flow

The Cash Flow of Cedar Ridge Contracting for July 1 to September 30, 2026 with Operating, Investing and Financing sections and Net, Opening and Ending Cash
Figure 6-17 The sample company's Cash Flow for July 1 to September 30, 2026.
  1. Net Income: the same figure as the Profit and Loss for the period.
  2. The operating adjustments: how much of the profit is tied up in, or released from, receivables, payables and other working capital. A positive amount adds cash; a negative amount uses cash.
  3. Total Operating: cash from running the business.
  4. Investing: cash spent on (or received from) equipment, property and other long-term assets.
  5. Financing: cash from owners and lenders, less draws and loan repayments.
  6. Net Cash: Total Operating + Total Investing + Total Financing.
  7. Opening Cash and Ending Cash: the total of your cash accounts the day before Start and at End.
  8. Unexplained: Ending Cash − Opening Cash − Net Cash. It is 0.00 when the statement accounts for every change in your cash accounts.

How Structally Classifies Each Line

The statement works from the movement in each account over the period, classified by the account's role in the Chart of Accounts:

Section Line Account Roles Behind It
Operating Net Income All income, cost and expense accounts
Operating Depreciation & Amortization of Assets Depreciation (added back, since it uses no cash)
Operating Gain/Loss Sale of Assets Gain Loss (removed, since the sale proceeds are investing)
Operating Accounts Receivable Receivable and Retainage Receivable
Operating Inventories Inventory
Operating Accounts Payable Payable, Credit Card and Retainage Payable
Operating Other Current Assets Prepaid, Other Current Asset, Costs in Excess of Billings, Uninstalled Materials
Operating Other Current Liabilities Deferred Revenue, Tax Payable, Other Current Liability, Billings in Excess of Costs, Provision for Contract Losses
Investing Equipment and property Equipment, Accumulated Depreciation and Property
Investing Other long-term assets Other Long Term Asset
Financing Equity contributed Owner Equity and Opening Balance Equity
Financing Draws and distributions Owner Draws
Financing Short-term debt Short Term Debt
Financing Long-term debt Long Term Debt

Cash means the accounts with the Cash role: your bank accounts and Undeposited Funds (in the sample company 1010 Operating Checking, 1020 Savings and 1050 Undeposited Funds). A credit card account is not cash; its balance change appears in the Accounts Payable line. A transfer or deposit between two cash accounts does not change Net Cash at all.

Every line is shown even when it is 0.00, and the lines always appear in the order above.

Equipment Bought on Account

Equipment bought on a vendor bill counts as an investing outflow when the bill is paid, not when it is entered. When a payment covers a bill with both equipment and other lines, Pay Bills asks how much is for Equipment and Property (Investing) (see Paying Bills).

Two notes can appear under the statement, each folded until you click it:

  • Non-Cash Investing and Financing Activities: "Transactions that changed what the company owns or owes without moving cash. They are not counted in the sections above." It lists equipment acquired on a bill (on the bill date) and entries that bought an asset with a loan, with links to each bill or entry.
  • Note on Manual Journal Entries: equipment put on account by a manual journal entry instead of a bill. Structally shows it when it was recorded, not when it is paid, "because a manual journal does not say which later payment settles it". Record equipment bought on account as a vendor bill to have it shown when paid.

The sample company has neither note for 2026: its equipment purchase that year, the $22,000.00 mini excavator, was recorded by a journal entry on April 8, 2026 and appears in Equipment and property for any period that includes that day.

Tying the Cash Flow to the Balance Sheet

The Cash Flow and the Balance Sheet describe the same books:

  1. Run the Balance Sheet with Display Columns By Quarters (or Months) so that one column ends the day before your Cash Flow starts and another ends on its End date.
  2. Add up the cash accounts in each column. The first total is Opening Cash; the second is Ending Cash.
  3. Their difference is Net Cash, and Unexplained is 0.00.
  4. Each operating, investing and financing line is the change between the two columns in the accounts listed in the table above (with the sign turned around for assets: an increase in an asset uses cash).

The Tie-Out report runs this check for you: Cash flow explains the change in cash compares the change in cash since the books began with Net Cash for the same period.

The cash accounts on the Balance Sheet by Quarter at Jun 30, 2026 and Sep 30, 2026
Figure 6-18 The three cash accounts on the Balance Sheet at June 30 and September 30, 2026.
  1. 1010 Operating Checking: 1,020,293.54 and 1,180,275.15.
  2. 1020 Savings: 205,440.27 and 217,513.25.
  3. 1050 Undeposited Funds: 0.00 and 64,660.00.

Worked Example: The Third Quarter of 2026

Run the Cash Flow from 07/01/2026 to 09/30/2026, and the Balance Sheet by Quarters from 04/01/2026 to 09/30/2026 (columns Jun 30, 2026 and Sep 30, 2026).

Cash. Opening Cash is 1,020,293.54 + 205,440.27 + 0.00 = $1,225,733.81 and Ending Cash is 1,180,275.15 + 217,513.25 + 64,660.00 = $1,462,448.40, an increase of $236,714.59.

Where the increase came from. Each line is the change in its accounts between June 30 and September 30:

Line Balance Sheet Change Amount
Net Income Profit and Loss, July 1–September 30, 2026 143,394.25
Depreciation & Amortization of Assets 1640 Accumulated Depreciation, 57,000.00 → 60,000.00 3,000.00
Accounts Receivable 1100 + 1110: 312,939.02 + 71,038.27 = 383,977.29 → 105,390.00 + 94,946.15 = 200,336.15 (a decrease frees cash) 183,641.14
Accounts Payable 2010 + 2100 + 2020: 247,560.81 + 912.02 + 19,190.15 = 267,662.98 → 190,203.41 + 1,000.88 + 43,614.02 = 234,818.31 (a decrease uses cash) −32,844.67
Other Current Assets 1200 + 1400 + 1450: 1,500.00 + 148,595.86 + 0.00 = 150,095.86 → 0.00 + 217,747.87 + 0.00 = 217,747.87 (an increase uses cash) −67,652.01
Other Current Liabilities 2400 + 2450: 112,263.44 → 124,939.32 12,675.88
Total Operating 242,214.59
Equipment and property 1630 unchanged at 160,500.00; the depreciation is already added back 0.00
Draws and distributions 3020 Owner's Draws, 27,500.00 → 30,000.00 −2,500.00
Long-term debt 2700 Equipment Loan, 27,000.00 → 24,000.00 −3,000.00
Total Financing −5,500.00
Net Cash 242,214.59 + 0.00 − 5,500.00 236,714.59

Net Cash equals the increase in cash, so Unexplained is 0.00. The quarter's biggest source of cash, after its profit, was collecting receivables: accounts receivable and retainage receivable together fell by $183,641.14. Its biggest use was the growth in Costs in Excess of Billings, revenue earned on jobs but not yet billed.

Common Mistakes and Troubleshooting

Message or Symptom Why It Happens What to Do
Start must be on or before end. Start is after End. Swap the dates.
Unexplained is not 0.00. The sections do not account for the whole change in cash. Run the Tie-Out for the End date and check Cash flow explains the change in cash.
Paying the credit card from checking shows in Operating. Credit card accounts are not cash; the payment lowers the card balance in the Accounts Payable line. Nothing to fix.
An equipment bill does not show in Investing. Equipment bought on a bill counts when the bill is paid. Look in Non-Cash Investing and Financing Activities, or run the period in which you paid it.
A transfer from checking to savings does not show anywhere. Both accounts are cash, so Net Cash does not change. Nothing to fix.
Net Income differs from the Profit and Loss. The Profit and Loss is on the cash basis. The Cash Flow uses the accrual net income; set the Profit and Loss to Accrual.