Strand 2 Chapter 24: Topic 66 Preparing a Cash Flow Statement

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? 2

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: o The expected income over a period of time o The expected total payments divided into fixed costs and variable costs for the same period o The expected net cash (expected receipts minus expected payments) each month o The opening cash and closing cash each month 3

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. 4

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. 5

Preparing a Cash Flow Statement Here is the blank statement. Details RECEIPTS Jan Feb Mar Apr Total PAYMENTS 6

Preparing a Cash Flow Statement Enter OPENING CASH – January. Details RECEIPTS Jan Feb Mar Apr Total PAYMENTS OPENING CASH 4,500 7

Preparing a Cash Flow Statement Enter OPENING CASH – Total. Details RECEIPTS Jan Feb Mar Apr Total PAYMENTS OPENING CASH 4,500 4,500 8

Preparing a Cash Flow Statement Next, enter planned RECEIPTS. Details RECEIPTS Jan Feb Mar Apr Total PAYMENTS OPENING CASH 4,500 4,500 9

Preparing a Cash Flow Statement Planned sales Details RECEIPTS Sales Jan Feb 20,900 27,000 Mar 24,500 Apr 24,200 Total 96,600 PAYMENTS OPENING CASH 4,500 4,500 10

Preparing a Cash Flow Statement Expected receipt of government grant (March) Details RECEIPTS Sales Government grant Jan Feb 20,900 27,000 Mar 24,500 10,000 Apr 24,200 Total 96,600 10,000 PAYMENTS OPENING CASH 4,500 4,500 11

Preparing a Cash Flow Statement Enter totals for all planned receipts (Jan–Apr). Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS OPENING CASH Jan Feb 20,900 27,000 20,900 27,000 4,500 Mar 24,500 10,000 34,500 Apr Total 24,200 96,600 10,000 106,600 24,200 4,500 12

Preparing a Cash Flow Statement Next, enter planned PAYMENTS. Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS OPENING CASH Jan Feb 20,900 27,000 20,900 27,000 4,500 Mar 24,500 10,000 34,500 Apr Total 24,200 96,600 10,000 106,600 24,200 4,500 13

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

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

Preparing a Cash Flow Statement Planned wage payments Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages OPENING CASH Jan Feb 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 4,500 Mar Apr Total 24,200 24,200 96,600 10,000 106,600 20,500 9,600 1,800 62,800 9,600 7,200 4,500 16

Preparing a Cash Flow Statement Planned electricity bills Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity OPENING CASH Jan Feb 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 4,500 Mar Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 62,800 9,600 7,200 550 4,500 17

Preparing a Cash Flow Statement Planned telephone bills Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone OPENING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 4,500 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 62,800 9,600 7,200 550 400 4,500 18

Preparing a Cash Flow Statement Planned car expenses (fleet service in March) Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses OPENING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 4,500 150 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 62,800 9,600 7,200 550 400 1,400 4,500 19

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

Preparing a Cash Flow Statement Planned insurance payment Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance OPENING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 4,500 150 210 790 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 62,800 9,600 7,200 550 400 1,400 840 790 4,500 21

Preparing a Cash Flow Statement Enter totals for all planned payments (Jan–Apr). Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance TOTAL PAYMENTS OPENING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 14,840 4,500 150 210 790 17,200 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 18,980 32,560 62,800 9,600 7,200 550 400 1,400 840 790 83,580 4,500 22

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

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

Preparing a Cash Flow Statement Carry Closing Cash from January into February. Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance TOTAL PAYMENTS NET CASH OPENING CASH CLOSING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 14,840 6,060 4,500 10,560 150 210 790 17,200 9,800 10,560 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 18,980 15,520 32,560 –8,360 62,800 9,600 7,200 550 400 1,400 840 790 83,580 23,020 4,500 25

Preparing a Cash Flow Statement Enter Closing Cash for February. Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance TOTAL PAYMENTS NET CASH OPENING CASH CLOSING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 14,840 6,060 4,500 10,560 150 210 790 17,200 9,800 10,560 20,360 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 18,980 15,520 32,560 –8,360 62,800 9,600 7,200 550 400 1,400 840 790 83,580 23,020 4,500 26

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

Preparing a Cash Flow Statement Enter Closing Cash for March. Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance TOTAL PAYMENTS NET CASH OPENING CASH CLOSING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 14,840 6,060 4,500 10,560 150 210 790 17,200 9,800 10,560 20,360 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 18,980 15,520 20,360 35,880 32,560 –8,360 62,800 9,600 7,200 550 400 1,400 840 790 83,580 23,020 4,500 28

Preparing a Cash Flow Statement Carry Closing Cash from March into April. Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance TOTAL PAYMENTS NET CASH OPENING CASH CLOSING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 14,840 6,060 4,500 10,560 150 210 790 17,200 9,800 10,560 20,360 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 18,980 15,520 20,360 35,880 32,560 –8,360 35,880 62,800 9,600 7,200 550 400 1,400 840 790 83,580 23,020 4,500 29

Preparing a Cash Flow Statement Enter Closing Cash for April. Details RECEIPTS Sales Government grant TOTAL RECEIPTS PAYMENTS Materials Computer system Wages Electricity Telephone Motor expenses Advertising Insurance TOTAL PAYMENTS NET CASH OPENING CASH CLOSING CASH Jan Feb Mar 20,900 27,000 20,900 27,000 24,500 10,000 34,500 12,500 14,000 15,800 1,800 1,800 1,800 250 180 150 210 14,840 6,060 4,500 10,560 150 210 790 17,200 9,800 10,560 20,360 Apr Total 24,200 96,600 10,000 106,600 24,200 20,500 9,600 1,800 300 220 950 150 210 210 18,980 15,520 20,360 35,880 32,560 –8,360 35,880 27,520 62,800 9,600 7,200 550 400 1,400 840 790 83,580 23,020 4,500 30