1. Chapter 12 The Cash Flow Statement © Cambridge University Press 2012

2. 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 © Cambridge University Press 2012

3. The Statement of Receipts and Payments An excess of Cash Receipts over payments will result in a cash surplus An excess of cash payments over Cash Receipts will result in a cash deficit © Cambridge University Press 2012

4. The Cash Flow Statement 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 © Cambridge University Press 2012

5. Operating activities are cash flows related to day-to-day trading activities Investing activities are cash flows related to the purchase and sale of non-current assets Financing activities are cash flows related to changes in the financial structure of the firm © Cambridge University Press 2012 The Cash Flow Statement

6. 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 © Cambridge University Press 2012 The Cash Flow Statement

7. GST Cash Flows There are four potential cash flows related to GST operating inflows of GST received GST refund operating outflows of GST paid GST settlement © Cambridge University Press 2012

8. Cash Versus Profit Cash and profit are different measures of performance Cash balances are calculated by comparing cash inflows and outflows Profit is calculated by comparing revenues earned with expenses incurred © Cambridge University Press 2012

9. Cash Versus Profit There are many possible reasons why a firm that is earning a profit can still suffer from a lack of cash Some cash items do not affect profit Some profit items do not affect cash Some items affect both cash and profit, but by differing amounts © Cambridge University Press 2012