# Cash management - accruals and prepayments

Registered Posts: 63 ? ? ?
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:

Increases/decreases in accruals;
Increases/decreases in prepayments.

Any thoughts appreciated,

• Registered Posts: 585
Jonno1 wrote: »
For instance, what are the actual cash flows when the following is shown:

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)
Jonno1 wrote: »
For instance, what are the actual cash flows when the following is shown:

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)
Jonno1 wrote: »
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)
Jonno1 wrote: »
For instance, what are the actual cash flows when the following is shown:

Increases/decreases in prepayments.
Opening balance at 1.1.11 £700 - this was paid last year
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)