Cash-flow statements.

System

Hello all,

Anyone out there got any tips on how to remember whats added/taken away, how to work the tax liability, what exactly goes on a cash-flow statement, etc, etc. Really struggling with this part of the unit, as is a couple in my college :oops: :oops: . Its easy to blame the tutor but i think she really isnt helping us a lot with this part of the unit. Ive got the Osbourne book to read/study and the more im reading and aimlessly failing to do the exercises im get into a right tither about it [bangs head against wall :shock: ].

Your help will be much appreciated.

Regards..

Sinbad.

System

Re:Cash-flow statements.

Hi,
for receivableas and inventory I am remembering the saying that less is more - i.e if the value has gone down (less) add it (more) and if it has gone up do the oposite. Once I have them done them I apply the same to payables but in reverse - It works for me.
The girl I sit next to uses a different approach, she thinks what the effect would be on the profit at the bottom of the Income statement if purchases or inventories increased/decreased, for example if inventories had increased over the year, cost of sale would decrease and thus profits would increase, so you need to deduct it back off.... something like that anyway, I didn't fully understand it but it works for her so may be worth a go.

On the tax front the olny way I can do it is to use a t-account:
1 - enter the opening balance on the credit side (i.e balance sheet tax liability balance at the end of the first year)
2 - enter the balance sheet tax liability at the end of the second year on the debit side as this is the the balance carried down
3 - the income statement for the year will show the p&L tax figure, this will be a debit on the income statement so enter this on the credit side of your t account.
4 - Balance off the account - Total opeing balance and the IS entry on the credit side. Copy the same total across to the debit side. The tax paid in the year is the missing figure. i.e what do you have to add to the balance carried down figure to equal the balance totaled on the credit side.

Try this out for a few of the example exercises in the book. I draw up a T account every time for this and it always seems to work.

Hope this helps!
B