The Statement of Cash Flows has historically given students alot of heartburn bu

The Statement of Cash Flows has historically given students alot of heartburn but it really isnt that scary. A cash-flowstatement simply stated reports the uses (where the cash wasspent) and the sources (where the cash came from) of cash during aperiod. Lets start with a very simplistic set of facts. I run aCPA firm and I billed my clients $50K during the month ofFebruary. To earn that $50K I incurred $20K of wage expense andanother $10K of overhead (rent utilities insurance etc.). So Imade $20K profit right? So I am sitting pretty? Not necessarily.What if I now tell you that $40K of my billings have yet to becollected? And my E&O insurance carrier increased my premiumand I had to pre-pay $10K of premiums this month. How does my cashflow differ from my profit? Will these transactions appear on myincome statement? My cash-flow statement?