Cash flow Statement Assignment Help & Online Tutoring

It shows where a business's cash came from and how it was used in a period. Readers use it to judge whether the business can pay its debts, fund investment and pay dividends. It adds information that the income statement alone does not show, because profit is not cash.

The three sections are operating, investing and financing activities. Operating covers the main trading activity. Investing covers buying and selling long-term assets. Financing covers raising and repaying capital and loans, and usually dividends. The three totals together explain the change in cash in the period.

The direct method lists actual cash received and paid, such as receipts from customers. The indirect method starts with profit and adjusts it for non-cash items and working capital changes. Both methods give the same net operating cash flow, but they present it differently.

Depreciation reduces profit but does not involve a cash payment in the period. The cash went out when the asset was bought, and that is shown in investing activities. So under the indirect method, you add depreciation back to profit to find operating cash flow.

An increase in receivables means that sales have been made but cash has not yet been collected, so it is deducted from profit. A decrease means more cash was collected than sales recorded, so it is added. Inventory works the same way, while payables work in reverse.

Dividends paid are usually shown in financing activities, although IAS 7 allows some choice, and they may appear in operating activities. Dividends received may be shown in operating or investing activities. Check the standard and format your course uses, and stay consistent in your answer.

Show the cash received from the sale in investing activities. Under the indirect method, also remove any gain or loss on sale from operating cash flow: deduct a gain and add back a loss. This stops the same item being counted in two sections.

Free cash flow is commonly described as operating cash flow less capital expenditure. It shows the cash left over after the business has invested in its assets. It is not defined in IAS 7, so definitions can differ, and you should always state which one you use.

Profit includes sales made on credit and excludes large asset purchases, so it can differ greatly from cash. A business may have high receivables, growing inventory or heavy loan repayments. This is why cash flow statements are read alongside the income statement and the balance sheet.

Add the three section totals to get the net change in cash, add the opening balance and compare the result with closing cash on the balance sheet. If they do not agree, check your signs on working capital changes and your workings for assets and loans.

Yes. A one-to-one tutor can take you through workings, adjustments and layout, using practice questions and your course format. You complete the statement yourself, so you understand each figure. Lessons are online, and you can focus on the part of the statement you find hardest.

IAS 7 is the international accounting standard on statements of cash flows. It requires cash flows to be classified into operating, investing and financing activities. Other frameworks, such as Ind AS 7 in India, are closely related. Check which standard your own course or exam follows.

Non-cash items affect profit without any cash movement in the period. Common examples are depreciation, amortisation, impairment and gains or losses on selling assets. Under the indirect method, they are adjusted so that profit is converted into the cash generated by operating activities during the period.

Use a working for non-current assets. Start with the opening balance, deduct the carrying value of disposals and depreciation, then compare with the closing balance. The missing figure is usually the purchase amount. Questions often test this working, so lay it out clearly to earn method marks.

Show the cash actually paid, not the expense. Find it using a working with opening and closing liabilities and the income statement charge. Interest paid is often shown in operating or financing activities depending on the standard, and tax paid is usually shown in operating activities.