Basic Cash Flow Statement

Introduction to the Basic Cash Flow Statement

The basic cash flow statement is one of the main accounting statements.

The cash flow statement shows a business’s cash inflow and cash outflow over an accounting period. The accounting period can be any length but is usually a month or a year.

What Should a Cash Flow Statement Look Like?

The layout of a cash flow for a company for annual reporting purposes is legally defined. However, for management account purposes the layout should be in the format most useful for managing the business. A typical and useful format for management is shown in the example below.

Basic cash flow statement
Net income 11,000
Depreciation 12,000
Loss on sale of assets 3,000
Gain on sale of investments -4,000
Changes in working capital -5,000
Operating activities 17,000
Purchase of assets -45,000
Proceeds from the sale of investments 10,000
Proceeds from the sale of assets 5,000
Investing activities -30,000
Issue of new capital 12,000
Issue of new debt 26,000
Repayment of debt -8,000
Dividend payments -2,000
Financing activities 28,000
Net cash flow 15,000
Beginning cash balance 1,000
Ending cash balance 16,000

As an example, the annual report for Apple shows a typical cash flow statement layout.

The basic cash flow statement sets out to show what cash was paid or received during the period.

The cash flow statement is split into three sections, operating activities, investing activities, and financing activities. Each section deals with a particular type of cash flow as follows:

  1. Operating cash flows – generated by the main revenue producing activities of the business
  2. Investing cash flows – result in a change to long term assets
  3. Financing cash flows – result in a change in either equity or borrowings

Further details on each of these cash flows sections can be found in our classification of cash flows tutorial.

At the end of the cash flow statement, all of these cash flows are totalled to give a net cash flow which represents the net cash received or paid by the business during the accounting period.

The cash balance at the end of the accounting period is calculated by adding together the net cash flow and the cash balance at the start of the accounting period. The ending balance should always agree to the cash balance shown on the balance sheet of the business.

Understanding the Basic Cash Flow Statement

Cash flow is the key to business survival. A business can continue for a period of time without profits but it cannot continue if the cash runs out.

The basic cash flow statement will demonstrate to suppliers and the banks that the business has sufficient resources to meet its cash requirements. Any number of people could be using your basic cash flow statement to make decisions about your business. It is important that you have an understanding of what information the cash flow statement is providing and what that information is telling you.

Basic Cash Flow Statement September 27th, 2017Team

You May Also Like


Related pages


accounts receivable aging report sampleexamples of double entry bookkeepingcontinuous interest rate formulacontra revenue account listending inventory formula accountingexample of fifo methodaccrual based accounting examplepercentage completion revenue recognitionirr excellroce ratioconstant growth perpetuityimpairment of goodwill journal entryaccounts receivable turnover in dayspresent value annuity tablewhat does accrued income meanbookkeeping for a small business templatetemporary accounts in accountingcalculating face value of a bonddouble declining depreciation tabledepreciation calculation in excelannuity present value excelfixed overhead capacity variancereceiving cash from an account receivabledownload amortization schedulebookkeeping questions and answers testbad debt allowanceobsolescence stockimprestbookkeeping samplescash cheque definitiondupont ratiosjournal entry for accounts payabledeferred revenue recognitionexamples of contra accountsprinciple of bookkeepingtable of future value annuity factorsprove it excel practice testwhat type of account is allowance for doubtful accountsvariable overhead rate formulasingle entry ledger booktreasury stock journal entrieskenexa prove it tutorialdouble declining balance depreciation formulamirr in excelonline amortization schedule generatoraccrued expenses and outstanding expensesfreight in freight out accountingconsignment journal entriesbalance day adjustmentsrecording accumulated depreciationexcel function irrpayback method formulaleverage ratio formula for banksjournal entries for accounts payable processhow to calculate creditors turnover ratioproperty dividend journal entrynpv factor tablewhat is aged trial balancestockholders equity accountinghistorical accounting conceptaccounts receivable divided by salesfob value definitiongross profit margin vs markupclosing entries general journalpresent value lump sum tablefixed asset turnover interpretationexcel general ledgerinternal rate of return discount ratecash voucher format in excelpayback formulafifo calculation exampleunit product cost calculatorclosing stock trial balanceoverhead absorption rate