(136)-STEPS TO PREPARING A CASH FLOW STATEMENT

Steps to Preparing a Cash Flow Statement

Step 1

Set out the Proforma cash flow statement with all the headings required by financial reporting standards (FRS).

Step 2

Complete the reconciliation of operating profit to net cash inflows as far as possible. When preparing the statement from balance sheets, you will usually have to calculate such items as depreciation, loss on sale of fixed assets and profit for the year.

Step 3

Calculate the figure for tax paid, dividend paid, purchase or sale of fixed assets, issue of shares and repayment of loans if these are not already given to you. Note that you may not be given the tax charge in the profit and loss account. You will then have to assume that the tax paid in the year is last year’s year-end provision and calculate the charge as the balance figure.

Step 4

If you are not given then profit figure, open up a working for the profit and loss account. Using the opening and closing balances, the taxation charge and dividends paid and purposed, you will be able to calculate profit for the year as the balancing figure to put in the statement.

Step 5

Complete the gross cash flow. Alternatively, the information may go straight into the statement.

Step 6

You will now be able to complete the statement by slotting in the figures calculate.