Cash management - accruals and prepayments
Jonno1
Registered Posts: 63 Regular contributor ⭐
I'm working through some past papers on cash management, one of the things I'm having difficulty with is calculating the actual cash flows which have occurred over the year when presented with a Balance sheet & Income statement where there are accruals and prepayments to take into account.
For instance, what are the actual cash flows when the following is shown:
Increase/decreases in trade payables;
Increases/decreases in trade receivables;
Increases/decreases in accruals;
Increases/decreases in prepayments.
Any thoughts appreciated,
For instance, what are the actual cash flows when the following is shown:
Increase/decreases in trade payables;
Increases/decreases in trade receivables;
Increases/decreases in accruals;
Increases/decreases in prepayments.
Any thoughts appreciated,
0
Comments
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For instance, what are the actual cash flows when the following is shown:
Increase/decreases in trade payables;
Opening balance at 1.1.11 £8,900 - this will be paid in current year
Closing balance at 31.12.11 £7,900 - This will be paid next year
Purchases during year £50,000 - This will be paid in current year
cash payment in current year = 8900 + 50,000 - 7,900 = £51,000
conclusion
if Trade Payable increases - less cash is paid out (difference between B/bal and C/bal)
if Trade Payable decrease = more cash is paid out (difference between B/bal and C/bal)For instance, what are the actual cash flows when the following is shown:
Increases/decreases in trade receivables;
Opening balance at 1.1.11 £7,000 - this will be received in current year
Closing balance at 31.12.11 £8,000 - This will be received next year
Sales during year £50,000 - This will be paid in current year
cash receipts in current year = 7000 + 50,000 - 8000 = £49,000
conclusion
if Trade receivables increases - less cash is received (difference between B/bal and C/bal)
if Trade receivables decrease = more cash is received (difference between B/bal and C/bal)For instance, what are the actual cash flows when the following is shown:
Increases/decreases in accruals;
Opening balance at 1.1.11 £800 - this will be paid in current year
Closing balance at 31.12.11 £900 - This will be paid next year
Expenses during year £50,000 - This will be paid in current year
Expense payment in current year = 800 + 5000 - 900 = £4900
conclusion
if Accruals increases - less cash is paid out (difference between B/bal and C/bal)
if Accruals decrease = more cash is paid out (difference between B/bal and C/bal)For instance, what are the actual cash flows when the following is shown:
Increases/decreases in prepayments.
Closing balance at 31.12.11 £800 - This is paid in current year
Expenses during year £5000 - This will be paid in current year
cash payment in current year = 800 + 5000 - 700 = £5100
conclusion
if prepayment increases - more cash is paid out (difference between B/bal and C/bal)
if prepayment decrease = less cash is paid out (difference between B/bal and C/bal)0
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