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Title: Statement of Cash Flow

Brief description:

This page describes how to create a statement of Cash Flow. A statement of cash flow is a financial statement which summarizes cash transactions of a business during a given accounting period and classifies them under three heads, namely, cash flows from the following activities:

  • Operating
  • Investing
  • Financing 

What’s covered in this document:

Statement of Cash Flows

Cash Flows from Operating Activities

This section includes cash flows from the principal revenue generation activities such as sale and purchase of goods and services. Cash flow from operating activities, can be computed and prepared using one of two methods known as the direct method and the  indirect method.

    1. The direct method involves determination of various types of cash receipts and payments such as cash receipts from customers, cash paid to suppliers, cash paid for salaries, etc. and then putting them together under the cash flow from operating section of cash flow statement. These figures are calculated using the beginning and ending balances of various accounts of the business and the net increase or decrease in the account. The exact formulas to calculate various cash inflows and outflows vary.

    2. The indirect method involves using the net income figure from the income statement to calculate the amount of net cash flow from operating activities. Since the income statement is prepared on accrual basis in which revenue is recognized when earned and not when received, net income does not represent the net cash flow from operating activities. It is therefore necessary to adjust earnings before interest and tax (EBIT) for those items which affect net income although no actual cash is paid or received against them.

Direct Method Example Cash Flows from Operating ActivitiesIndirect Method Example Cash Flows from Operating Activities
Cash Receipts from Customers =Net Income
+Net Sales

+Non-Cash Expenses:

(Depreciation, Depletion & Amortization Expense)

−Ending Accounts Receivable

+Non-Operating Losses:

(Loss on Sale of Non-Current Assets)

Cash Payments to Suppliers =

-Non-Operating Gains:

(Gain on Sale of Non-Current Assets)

+Ending Inventory

+Decrease in Current Assets:

(Accounts Receivable, Prepaid Expenses, Inventory etc.)

+Beginning Accounts Payable-Increase in Current Assets
−Ending Accounts Payable

+Increase in Current Liabilities:

(Accounts Payable, Accrued Liabilities, Income Tax Payable etc.)

Cash Payments to Employees =-Decrease in Current Liabilities
+Beginning Salaries Payable=Net Cash Flow from Operating Activities
−Ending Salaries Payable
+Salaries Expense


Cash Payments for Purchase of Prepaid Assets =
+Ending Prepaid Rent, Prepaid Insurance etc.
+Expired Rent, Expired Insurance etc.
−Beginning Prepaid Rent, Prepaid Insurance etc.


Interest Payments =
+Beginning Interest Payable
−Ending Interest Payable
+Interest Expense


Income Tax Payments =
+Beginning Income Tax Payable
−Ending Income Tax Payable
+Income Tax Expense


Cash Flows from Investing Activities

Cash flows from investing activities are cash inflows and outflows related to activities that are intended to generate income and cash flows in future. This includes cash in-flows and out-flows from sale and purchase of long-term assets.

Cash Flows from Investing Activities

Sale of Equipment$89,000
Sale of Land$247,000
Purchase of Equipment− $100,000
Net Cash Flow from Investing Activities
$136,000


Cash Flows from Financing Activities

Cash flows from financing activities are the cash flows related to transactions with stockholders and creditors such as issuance of share capital, purchase of treasury stock, dividend payments, and more.

Cash flows from financing activities is the last of the three sections of a statement of cash flows. It shows the cash inflows and outflows related to transactions with the providers of finance, i.e., the owners and the creditors of the company. Thus, cash flows from financing activities include the following basic components:

  • Proceeds from borrowings (both short-term and long-term)
  • Cash received from owners usually on issuance of stock
  • Repayments of borrowings
  • Repayments to owners

Note that certain items are classified differently by different accounting standards. For example, under IFRS, interest payments and dividend payments are classified either as cash flows from operating activities or cash flows from financing activities. Under US GAAP, however, interest payments can only be classified as cash flows from operating activities and dividends can only be classified as cash flows from financing activities.


Example:


Cash Flows from Financing Activities
Loan Obtained$20,000
Issuance of Common Stock$125,000
Treasury Stock Purchased− $32,000
Dividends Paid− $10,000
Net Cash Flow from Financing Activities$103,000


How to create a Cash Flow Statement in Unanet

Set up the Cash Flow workbook 

  1. Download the attached files "1. GL Transactions for CF Statement Export" workbook (do not open this file) and "2. GL Transactions and CF Statement" (both located below) and save to your computer.

  2. For the initial setup, Run the Unanet GL Summary Report for prior year ending balances.

    1. Copy/paste in Cell A1 of PY Ending Balances tab of the GL Transactions and CF Statement workbook.

    2. The Account listing from the GL Summary Report will include the account code and account name. You will need to separate these to allow the information to import into the other tabs. You should highlight column A and use the 'Text to Columns' functionality in Excel to separate the account code and the name.  
  3. Import (Admin > Export > Import - you will only need to do this the first time) and run the "1.  GL Transactions for CF Statement Export."
    1. Download the output and copy into the GL Transactions Export tab of GL Transactions and CF Statement workbook. You should run each accounting period separately as each period will have its own set of columns.




  4. Export Accounts and copy entire list in GL Summary tab.
    1. Go to Admin > Export > Accounts to download this in .csv format.
    2. Copy and paste this accounts list into the GL Summary tab.
    3. Using the SumIF() function, sum up transactions from GL Transactions Export tab.

  5. In the CF Statement tab, determine which accounts from the GL Transactions tab should sum in each row and sum them up:

Update Cash Flow Statement 

  1. Run step 3, above, each month and paste output into the GL Transactions Export tab.

    1. Copy formulas in the CF Statement tab to the right to capture each new period.

  2. Each Fiscal Period, Run GL Transactions for Cash Flow Statement Export .csv file (below) and copy/paste in Cell A1 of GL Transactions Export tab.

    1. Run export for transactions using Previous Fiscal Month for the Fiscal Period(s) Range.

Maintain Cash Flow Statement

  • When new accounts are added to the Chart of Accounts, ensure these new accounts are added in the GL Transactions and GL Transactions for CF tabs.


Additional Information

Help Docs - How to import an Export Template


Attachments

  1. GL Transactions for CF Statement Export.csv
  2. GL Transactions and CF Statement.xlsx
  3. Cash Flow Statement Workbook.xlsx



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