Which financial statement reports cash inflows and outflows over a period?

• A. The income statement
• B. The balance sheet
• C. The statement of changes in equity
• D. The statement of cash flows

Answer: (D)

Cash inflows and outflows over a period are tracked by the statement of cash flows. This statement shows how cash moves in and out of the business during a chosen time frame, breaking the activity into operating activities (cash generated or used by core operations), investing activities (cash from buying or selling long-term assets), and financing activities (cash from borrowing, repaying debt, issuing or repurchasing shares, paying dividends). It provides the actual cash impact, which is different from net income reported on the income statement that uses accrual accounting. The balance sheet, in contrast, captures financial position at a single point in time, and the statement of changes in equity shows only movements in equity accounts, not cash flows. By presenting cash receipts and payments and reconciling to ending cash, the cash flow statement clarifies liquidity and cash management during the period.