Cash Flow Learning Trail
D: Balances
Follow the links for explanations of the terms used in the cash flow forecast.
| Jan | Feb | Mar | |
|---|---|---|---|
| Revenue | |||
| Cash Sales | 600 | 1200 | 1750 |
| Debtors Payments | 0 | 600 | 850 |
| Total Revenue | 600 | 1800 | 2600 |
| Expenses | |||
| Raw Materials | 970 | 1200 | 1350 |
| Wages | 800 | 800 | 800 |
| 220 | 220 | 220 | |
| Rates | 40 | 40 | 40 |
| Electricity | 60 | 60 | 60 |
| Travelling | 80 | 80 | 150 |
| Sundries | 130 | 80 | 80 |
| Exhibition Charges | 150 | 150 | 250 |
| Total | 2450 | 2630 | 2950 |
| Net Cash Flow | -1850 | -830 | -350 |
| Opening Balance | 750 | -1100 | -1930 |
| + / - Net Cash Flow | -1850 | -830 | -350 |
| Closing Balance | -1100 | -1930 | -2280 |
So that is how we construct a Cash Flow Statement. Make sure that you read through again any parts you may be unsure of and when you are confident progress to Part 3. The guide to producing answers and the interactive self-check test. Good Luck!
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Net Cash Flow. Once calculated this can then be used to obtain the Closing Balance for the period. To do this we deduct the Net Cash Flow from the opening balance if it is a negative figure, or we add it if it is a positive figure.
Closing Balance. Here we see that we have a closing balance of -£1100, i.e. a predicted cash shortage of £1100. This was found by taking the Net cash Flow -£1850 from the Opening Balance £750. The Closing Balance for one month or period, becomes the Opening Balance for the next month or period. In this case we see that the Closing Balance for January, -£1100, becomes the Opening Balance for February, -£1100
The opening balance is the amount of cash available at the beginning of the period. This is combined with net cash flow to find the closing balance.