What is Cashflow?

Cashflow is an accounting term that describes the inward and outward flow or money within a specific time period.

Typically these specific time periods are monthly, quarterly, half yearly and / or yearly, and maps the income (money earned) and expenses (money spent).

Cashflow Statements are also known as Profit and Loss Statements.

The name comes from the fact that the final outcome for the period will either be a profit or a loss as shown in the following equation;


Income – Expenses = Profit (if positive) or Loss (if negative)

Notice the colours used in the equation, they lead to the phrases "Back in the black" for returning to profit, and "Awash in red ink" for losses.

What is in a Cashflow Statement?

Cashflow statements record in detail (or summary) all money movements for a strictly defined period of time. The outcome, that is the profit or loss, indicates the result for that period. If you wish to accumulate money then a profit is desirable, while if you wish to part with money a loss is preferable.


The more detail that is recorded the more accurate the statement is and analysis provides a better story which illustrates how the outcome came about. If any transactions entries are not included then the result, the profit or loss, will not be accurate. Detail allows a better understanding of the flow of money and thus you can find areas to improve on more quickly and accurately.

Profit and Loss Statement


A Simple Profit and Loss Statement


Further Reading

Cash Flow (wikipedia)