Which financial statement summarizes the flow of funds into and out of the association and is broken into operating, investing, and financing activities?

• A. Balance sheet.
• B. Income statement.
• C. Statement of cash flows.
• D. Statement of changes in members' equity.

Answer: (C)

The key idea is that this statement tracks actual cash movement during a period, broken into three activity areas: operating, investing, and financing. It shows how cash enters and leaves the association, not just how income and expenses are reported. Operating activities cover the day-to-day cash flow from dues, fees, and payments for services, minus cash payments for those operating costs. Investing activities involve cash used for buying or selling long-term assets or investments, which affects the association’s capital projects and reserve investments. Financing activities reflect cash changes related to borrowing, debt repayments, and other transactions that fund the association’s financing needs.

This focus on cash, rather than accrual income or asset values, helps the board assess liquidity and whether there will be enough cash to cover upcoming obligations or fund reserves. The balance sheet shows what is owned and owed at a moment in time, the income statement shows profitability over a period, and the statement of changes in members’ equity tracks changes in equity accounts—none of those present the cash flow by activity the way the statement of cash flows does.