A cash flow statement or cash flow is used to illustrate the activities of a company in terms of cash flow and distribution. Thus, an answer is given to a question that cannot be obtained from other reports, namely: is there enough funds circulating in the company's business to settle its obligations? The question is quite serious, and in this sense, the main role is played by the methodology that helps to correctly fill out the cash flow statement.
Instructions
Step 1
The cash flow statement is a combination of three main blocks, the results of calculations for which are summed up in the total amount for the reporting period. These blocks include cash flows from current, investment and financial activities. Each of these blocks is formed by summing receipts by type of activity and subtracting the corresponding costs.
Step 2
To fill out a cash flow statement, you will need a balance sheet and income statement (P&L). With the help of the balance sheet, you will be able to track changes in the investment and financial activities of the firm. But since the bulk of a company's turnover is usually day-to-day activities, a profit and loss statement is more useful. It should be adjusted so that items reflect cash flows “on payment” rather than “on shipment”. At the same time, do not forget to observe the basic principles of compiling cash flow: • Cash flow is continuous;
• Cash flow does not depend on the time of occurrence of obligations and reflects only the facts of receipt of funds and expenses;
• The balance at the end of the reporting period cannot be negative.
Step 3
To complete the cash flow statement, use the direct or indirect method of adjusting the income statement. The essence of the direct method lies in the article-by-article transformation of the lines of the OP&L into actual data on the receipt of funds and expenses. With the indirect method, all expenses not related to cash flows (for example, depreciation) are added to the profit for the reporting period from the P&L, and all related incomes that are also not related to cash flows are deducted.
