Determine the calculations for the cash flows, Financial Management

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The calculations for the cash flows

Actual amount of cash paid or received during the period needs to be established. This can get quite  tricky  as  there  would be  accruals bought  forward, carried  forward and  prepayments  bought forward and carried  forward. There will also be transactions which don't affect cash flow such as depreciation and re-valuations.

Best way of doing this is to set up a "T"account, fill in all the relevant information and balancing figure will be cash figure. For direct method, "T" accounts can also be used toestablishreceipts from customers, cash payments to suppliers etc.

Illustrations of "T"accounts to establish cash flow.

 


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