Lecture notes
statements of cash flow
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- University Of Bath (UoB)
cash flow statements
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MN10668 – lec 7Statements of cash flows
Profit = revenue – expenses
Cash = cash receipts – cash payments
They are not the same
The purpose of statements of cash flows
- Show the reasons for change in the cash and bank balance over the accounting year
- Show the manner in which cash has been generated and used during the year
- Show the effects on cash flow of an entity’s operating, investing ad financial activities
for a given period
- Provide information that assists in the assessment of liquidity, solvency and financial
adaptability
The basic structure of SCF
- Cash inflows
- Less: cash outflows
- = increase or decrease in cash over the period
Cash inflows of companies
- Cash inflows
o Profit before taxation and dividends after adjusting for non-cash items such
as depreciation, profits and losses on the slae of non-current assets, and
changes in the provision of bad debts
o Proceeds from the sale of non-current assets
o Proceeds from the issue of shares, loan stock and debentures, and any other
money borrowed long term. Increases in the current liabilities and decreases
in current assets
Cash outflows of companies
- Cash outflows
o Taxation payments
o Dividends paid
o Payments to acquire non-current assets
o Repayments of shares, loan stock, debentures and any other long term loans
, Statement of cash flows example
Take values from SOFP
The relationship between the SCF and –
Statement of profit and loss – the statement of profit and loss shows the profit,
whereas the SCF shows the reason for the change in cash. Profit Is not the same as
an increase in cash, it is only one source of cash
Statement of financial position – the SOFP is a list of assets, liabilities and capital at
the end of the year, whereas the SCF identifies the changes in assets, liabilities and
capital during the year and the resulting effect on cash
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