Chapter 12 - Cash Flow Statement

Headings

- Cash flow from operating activities - Net cash flows from operations - Cash flow from investing activities - Net cash flows from investing activities - Cash flow from financing activities - Net cash flows from financing activities - Net inflows (decrease) in cash position - Add bank balance at start - Bank balance at end

Examples of profit not cash:

- Credit sales - Discount revenue - Stock gain/loss - Bad debts - Depreciation

Some items affect cash and profit by different amounts:

- Credit sales vs Receipts from debtors - Prepaid expense paid vs expense consumed - HAVE to apply to the scenario and say links if they are there

Examples of Cash not Profit:

- GST - Loans - Stock - NCA

The Cash Flow Statement is used to:

- aid decision-making and planning - assess the firm's financial performance - assist in planning future cash activities - facilitate the calculation of financial indicators

The Cash Flow Statement reports cash inflows and cash outflows relating to:

- operating activities - investing activities - financing activities - changes in the firm's bank balance over the Reporting Period

Cash Flow Statement

An accounting report that details all cash inflows and outflows from operating, investing and financing activities, and the overall change in the firms cash balance

Cash Surplus

An excess of Cash Receipts over payments will result in a cash surplus

Cash Deficit

An excess of cash payments over Cash Receipts will result in a cash deficit

Investing Activities

Investing activities are cash flows related to the purchase and sale of non-current assets (NCA)

GST Cash Flows

Only 3 at one time: - operating inflows of GST received - operating outflows of GST paid - GST settlement

Operating Activities

Operating activities are cash flows related to day-to-day trading activities (CA, CL, REV, EXP)

The Statement of Receipts and Payments

The Statement of Receipts and Payments reports cash received and paid, and the change in the firm's bank balance over a Reporting Period

REMEMBER:

USE BRACKETS FOR CASH OUTFLOWS

Cash versus Profit

Cash and profit are different resources. Cash surplus/deficit is calculated by cash inflows minus cash outflows and profit is calculated by revenues earned less expenses incurred. Not all profit is cash and not all cash is profit. - Apply to the scenario E.g. Cash deficit is when cash outflows are greater than cash inflows

Financing Activities

Financing activities are cash flows related to changes in the financial structure of the firm (NCL, OE)