Preparing the Statement of Cash Flows Using the Balance Sheet “Squeeze” Spreadsheet

Abstract

The statement of cash flows (SCF), established pursuant to Statement of Financial Accounting Standards No. 95 (FAS 95), is perhaps the most useful of the standard financial statements-balance sheet (BS), income statement (IS), and SCF-in evaluating the financial viability of a company, particularly a small business. Unfortunately, the SCF is probably the least understood of the three statements and the most difficult to prepare, and is frequently not included in the financial statement compilations issued by accountants for many small businesses. This paper describes a spreadsheet methodology commonly employed in private industry to facilitate preparation of the SCF, which can be suitable for teaching accounting and finance students at the undergraduate level.