Cash Flow Statement

Cash Flow Statement meaning:
A cash flow statement is a financial statement which reflects the inflow of revenue and outflow of expenses resulting from operating, investing and financing activities during a specific period of time. A cash flow statement shows the cash position of the business at any point of time. The cash flow statement should be prepared on monthly basis for the first year, on quarterly basis for the second year and on an annual basis for the third year. Following is the list of certain items which should which should appear in the same order in the cash flow statement:

1. Cash refers to cash on hand in the business.

2. Cash sales are income from sales paid for by cash.

3. Receivables are income from the collection of money owed to the business resulting from sales.

4. Other income is income from investments, interest on loans that have been extended, and the liquidation of any assets.

5. Total income is the sum of total cash, cash sales, receivables and other income.

6. Material is the raw material used in the manufacture of a product

7. Direct labour is the labour required to manufacture a product.

8. Overhead is all fixed and variable expenses required for the operations of the business.

9. R&D is labour expenses required to support the research and development operations of the business.

10. Taxes are all taxes, except payroll, paid to the appropriate government institutions.

11. Capital represents the capital requirements to obtain any equipment needed to generate income.

12. Loan payments are the total of all payments made to reduce any long-term debts.

13. Total expenses are the sum of material, direct labour, overhead expenses, marketing, sales, and R&D, taxes, and capital and loan payments.

14. Cash flow is the difference between total income and total expenses. This amount is carried over to the next period as beginning cash.

15. Cumulative cash flow is the difference between current cash flow and cash flow from the previous period.