Statement of cash flow

Statement of cash flow By Praew 11Yo

Statement of Cash Flow

Statement of Cash Flow Business need to ensure: • Sufficient profits are made to finance the business activities • Sufficient cash funds are available when needed

Business activity • 1. operating Activity (sales) • revenue • Expense • Current asset • Current liability • Profit & loss

2. Investing Activity (Spend) • Non-current asset • 3. Financing activity (earn) • Non-current liability • Common Stock • - Dividend • Drawings

Statement of Cash Flow International Accounting Standard 7 – IAS 7 Companies are required to include a statement of cash flows with their published financial statements

Cash In flow & Cash out-flow

Statement of Cash Flow Profit & Liquidity Even though companies make profits. They could face a shortage of cash Example: • A sole trader is making $40,000 profits for the year, but his drawings have been over $60,000 • A partnership whose products will not be on the market for quite a long time has invested in some very expensive machinery. A lot of money has been spent, but there’s no income.

Statement of Cash Flow Items not involved in a movement of cash: • Depreciation • Allowance for doubtful debts • Book profits and losses on sale • Disposal of non-current assets

Statement of Cash Flow 1. Depreciation

Statement of Cash Flow 2. Allowance for doubtful debts + to net profit any increase in the allowance for doubtful debts -from net profit any decrease in the allowance for doubtful account

Statement of Cash Flow 3. Book profits and losses on sale

Statement of Cash Flow 4. Disposal of non-current assets

Statement of Cash Flow Net Profit: • After adjustments for depreciation • After adjustments to allowances for doubtful debts • After adjustments book profits/losses on sales of non-current assets

Reconciliation of net profit to net cash flow

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Statement of cash flow