Statement of cash flows

BTHM-Topic 7 Statement of Cash Flows Financial Accounting


Topic 7 STATEMENTS OF CASH FLOWS

Companies are required by IAS 7 Statements of Cash Flows to include a Statement of Cash Flows in
their financial statements.

A Statement of Cash Flows is simply a summary of the cash receipts and payments. The purpose is
to provide users of the financial statements with more information than is provided just by the
Income Statement and Statement of Financial Position.

There are two approaches allowed in preparing a Statement of Cash Flows – the direct method and
the indirect method.

The indirect method

This method is more common in practice.




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, BTHM-Topic 7 Statement of Cash Flows Financial Accounting


Statement of Cash Flows - PROFORMA
X plc Statement of Cash Flows - PROFORMA for the year ended 31 December 2011
RS RS
Cash flows from operating activities
Net profit before taxation x
Adjustments for:
Depreciation x
Profit on sale of non current assets (x)
Interest expense x
Operating profit before working capital changes x
Increase in accounts receivable (x)
Increase in inventories (x)
Increase in accounts payable x
Cash generated from operations x
Interest paid (x)
Dividends paid (x)
Taxation paid (x)
Net cash from operating activities x

Cash flows from investing activities
Purchase of non-current assets (x)
Sales proceeds of non-current assets x
Interest received x
Dividends received x
Net cash from investing activities x

Cash flows from financing activities
Proceeds from issue of shares x
Repayment of debenture loan (x)
Net cash from financing activities x

Net increase in cash & cash equivalents x
Cash and cash equivalents b/f x
Cash and cash equivalents c/f x




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