A cash flow statement provides a detailed view about the changes in cash and cash equivalents of an organization by classifying cash flows into investing, operating and financing activities. It is necessary that an organization should prepare a cash flow statement and record it for making financial statements. The cash flow statement shows outflow and inflow of cash and other cash equivalents resulting from a variety of activities of an enterprise in a specific accounting period. The cash flow statement traces the various sources which causes inflow of cash and use of cash which causes an outflow of cash. The information generated using a cash flow is useful in creating financial statements to assess the ability of an organization to make cash.
There are different templates of statement of cash flow available on the internet. Usually a cash flow begins with the company name and the date of the accounting period. Below it, a table of various accounts is seen. The various accounting periods are seen beside the list of accounts for example year 1, year 2, etc. There are certain specific accounts mentioned in the list. The list includes accounts like; cash on hand, sales, operating expenses, etc. Under these accounts there are many sub accounts seen in a cash flow statement. Many companies present their statement as cash flow from operating activities, financing activities and investing activities. These are the common elements usually seen in all cash flow statements, but you can make changes to the format according to your need.
Creating a Statement of Cash Flow can help to present a company’s inflow and outflow cash. The bank and Statement of Cash Flow template you create can be customized to your monthly needs. It is not as difficult as it seems and the following steps will help in creating a good Bank statement template for your use.
Step1
First of all, you can create a Statement of Cash Flow template from scratch using any good programs like the Microsoft excel.
Step2
Enter the year in field A1 of the document. Enter the current cash on hand, account for the month in field A2 of the sample of the worksheet.
Step3
Now enter the sales account segment. You can mention it separately as cash sales and accounts receivable. Write cash sales on a field and accounts receivable on a different one. Set up formulas to add the values in the next column.
Step4
Write cost of goods sold in a segment, it includes many other cost in it. Write the operating expenses segment, it will include many other small accounts of expenses like advertising, taxes, payroll, utilities, etc.
Step5
You can do all the listings. Total all the operating expenses in the file.
Step6
Now add total expenses with the cost of goods sold. Write the result as total expenses.
Step7
Now subtract total expenses from cash in hand. You will get the cash available at the end of the year. Now copy the same steps to get the values of the next year.
1
There are three main categories in a cash flow, they are operating activities, investing activities, and financing activities. Operating activities are the core operations to generate revenue. Investing activities include acquiring or sale of an asset. Financing activities occur when there is a change in the structure and size of owner’s equity.
2
The information produced by cash flow is used to assess the ability of an organization to generate cash. Some of the investors use it asses the future value of an organization’s cash flow. The Cash Flow Statement helps in ensuring the liquidity of an enterprise.
3
It also helps in taking steps to balance its cash inflow and cash outflow, considering the changing situation. It is also supportive in inspecting the accurateness of past assessments of future cash flows and in examining the relation between profitability and its impact of changing conditions.
4
The decisions that are taken by the investors require an evaluation of the ability of an organization to generate cash and cash equivalents and the timing and certainty of their generation.
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