Strand 2 Chapter 24: Topic 66 Preparing a Cash Flow Statement (pages 296–7)

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Presentation transcript:

Strand 2 Chapter 24: Topic 66 Preparing a Cash Flow Statement (pages 296–7)

Preparing a Cash Flow Statement What is Cash Flow? Cash flow is the amount of money coming into and going out of a business over a period of time. Cash is described the ‘lifeblood’ of a business. What do you think this means?

Preparing a Cash Flow Statement What Is a Cash Flow Statement? A cash flow statement or cash budget shows the planned flow of cash in and out of a business over time. It shows: The expected income over a period of time The expected total payments divided into fixed costs and variable costs for the same period The expected net cash (expected receipts minus expected payments) each month The opening cash and closing cash each month

Preparing a Cash Flow Statement Traders Ltd cash flow statement In this example, we’ll look at how to prepare a cash flow statement for Traders Ltd. This is taken from pages 296–7 of the textbook. Follow each step to see how the account builds.

Preparing a Cash Flow Statement The following information relates to Traders Ltd for the four-month period January to April. There was an opening cash amount of €4,500 on 1 January.

Preparing a Cash Flow Statement Here is the blank statement. Details Jan Feb Mar Apr Total RECEIPTS PAYMENTS

Preparing a Cash Flow Statement Enter OPENING CASH – January. Details Jan Feb Mar Apr Total RECEIPTS PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Enter OPENING CASH – Total. Details Jan Feb Mar Apr Total RECEIPTS PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Next, enter planned RECEIPTS. Details Jan Feb Mar Apr Total RECEIPTS PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Planned sales … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Expected receipt of government grant (March) … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Enter totals for all planned receipts (Jan–Apr). Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Next, enter planned PAYMENTS. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS OPENING CASH 4,500

Preparing a Cash Flow Statement Planned purchase of materials … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned purchase of new computer system … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned wage payments … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned electricity bills … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned telephone bills … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned car expenses (fleet service in March) … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned advertising … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 OPENING CASH 4,500

Preparing a Cash Flow Statement Planned insurance payment … Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 OPENING CASH 4,500

Preparing a Cash Flow Statement Enter totals for all planned payments (Jan–Apr). Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 OPENING CASH 4,500

Preparing a Cash Flow Statement Enter NET CASH (Total Receipts LESS Total Payments). Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500

Preparing a Cash Flow Statement Enter CLOSING CASH for January (Net Cash PLUS Opening Cash). Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 CLOSING CASH 10,560

Preparing a Cash Flow Statement Carry Closing Cash from January into February. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 10,560 CLOSING CASH

Preparing a Cash Flow Statement Enter Closing Cash for February. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 10,560 CLOSING CASH 20,360

Preparing a Cash Flow Statement Carry Closing Cash from February into March. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 10,560 20,360 CLOSING CASH

Preparing a Cash Flow Statement Enter Closing Cash for March. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 10,560 20,360 CLOSING CASH 35,880

Preparing a Cash Flow Statement Carry Closing Cash from March into April. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 10,560 20,360 35,880 CLOSING CASH

Preparing a Cash Flow Statement Enter Closing Cash for April. Details Jan Feb Mar Apr Total RECEIPTS Sales 20,900 27,000 24,500 24,200 96,600 Government grant 10,000 TOTAL RECEIPTS 34,500 106,600 PAYMENTS Materials 12,500 14,000 15,800 20,500 62,800 Computer system 9,600 Wages 1,800 7,200 Electricity 250 300 550 Telephone 180 220 400 Motor expenses 150 950 1,400 Advertising 210 840 Insurance 790 TOTAL PAYMENTS 14,840 17,200 18,980 32,560 83,580 NET CASH 6,060 9,800 15,520 –8,360 23,020 OPENING CASH 4,500 10,560 20,360 35,880 CLOSING CASH 27,520