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)