Please watch this role play video on Cash Flow Statements!
Saduni and Pauline from the Class of 2014.
https://drive.google.com/drive/#folders/0B3lBZTLHkqJsMWl2WklTWEFVOWs/0B3lBZTLHkqJsSkdJNHhlMV9OOWM/0B3lBZTLHkqJseE5uU0dfYnlfZVk/0B3lBZTLHkqJsXzFHTkZQVXN3b1k/0B3lBZTLHkqJsM0ROcjN2VjA4VXM/0B3lBZTLHkqJsdjlUMWVxZVczVXM
From now on, we have to prepare classified Cash Flow Statements! No more simple cash receipts less cash payments.
The cash flows of the business are categorised into operating activities (day-to-day cash flows), investing activities (think NCAs) and financing activities (think cash flows to do with the owner and loans and loan repayments ... but not interest.)
For each category, the inflows must come first (in no particular order) and the outflows second (in no particular order) which must be shown in (brackets).
You must show a net figure for each category and then a total net change as well. Add this to the cash at start and you get cash at end ... the last figure in the report.
The most common error made by students is to include non cash items. The question often tempts you to do this.
Remember that 4 letter word CASH. Say that again ... CASH. Say that again ... CASH.
When reporting debtor receipts as an operating activity inflow, ensure you extract the discount expense since discount is a non cash item. When reporting creditor payments, extract the discount revenue since this is also a non cash item.
Do not include items such as credit sales, credit purchases, cost of sales, bad debts, stock loss, stock gain, depreciation, accrued expenses etc. Why ... these are non cash items!
Saduni and Pauline from the Class of 2014.
https://drive.google.com/drive/#folders/0B3lBZTLHkqJsMWl2WklTWEFVOWs/0B3lBZTLHkqJsSkdJNHhlMV9OOWM/0B3lBZTLHkqJseE5uU0dfYnlfZVk/0B3lBZTLHkqJsXzFHTkZQVXN3b1k/0B3lBZTLHkqJsM0ROcjN2VjA4VXM/0B3lBZTLHkqJsdjlUMWVxZVczVXM
From now on, we have to prepare classified Cash Flow Statements! No more simple cash receipts less cash payments.
The cash flows of the business are categorised into operating activities (day-to-day cash flows), investing activities (think NCAs) and financing activities (think cash flows to do with the owner and loans and loan repayments ... but not interest.)
For each category, the inflows must come first (in no particular order) and the outflows second (in no particular order) which must be shown in (brackets).
You must show a net figure for each category and then a total net change as well. Add this to the cash at start and you get cash at end ... the last figure in the report.
The most common error made by students is to include non cash items. The question often tempts you to do this.
Remember that 4 letter word CASH. Say that again ... CASH. Say that again ... CASH.
When reporting debtor receipts as an operating activity inflow, ensure you extract the discount expense since discount is a non cash item. When reporting creditor payments, extract the discount revenue since this is also a non cash item.
Do not include items such as credit sales, credit purchases, cost of sales, bad debts, stock loss, stock gain, depreciation, accrued expenses etc. Why ... these are non cash items!
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