Unit 4
Unit 4
CASH FLOW
FUNDAMENTAL ACCOUNTING
Dividends payments
OPERATING ACTIVITIES
The following items must be separately disclosed on the
face of the cash flow statement
Operating Investing Financing
Interest received
Interest paid
Dividends received
Dividends paid *
Taxation paid
Cash inflows (loans raised) and cash outflows (loans repaid) are
shown separately on the CFS.
Indirect method
reports on the net
cash flow of an entity
Format: Indirect Method
Cash flows from operating activities The indirect method
Profit before taxation reports on the net cash
Adjustments for : flow of an entity
+ Interest paid
- Interest received
+ Depreciation ( and other non-cash items) The cash generated from
Operating profit before working capital changes operations section is
Decrease / (Increase) in inventory calculated by converting
Decrease / (Increase) in trade receivables Profit before tax to cash
Increase /(Decrease) in trade payables
Cash generated from operations
Interest received/paid
Dividends received/paid
Tax received/paid
Net cash from /(used in) operating activities
Cash flows from investing activities
The format for both
Cash flows from financing activities
methods is the same from
this point onwards
NON-CASH FLOW ITEMS
Non-cash flow items include:
Depreciation
Provision for credit losses
Writing off the inventory
Profit on sale of non-current assets
Loss on sale/ scrapping non current assets
Revaluation of assets
Writing off of intangible assets and Transfers to and from
reserves
PREPARING THE CASH FLOW STATEMENT