Statement of Cash Flows

wannabebean

Hello All

Having a bit of difficulty with the Reconciliation for SOCF.

Instead of having to remember all of what you need to add or subtract, is there an easy central concept to it that you could simply apply?

Any help here much appreciated!

Steve Collings

Hi

Think of the entries as inflows or outflows of cash. For example an increase in receivables means less cash has been collected (ie less cash coming in), thus an outflow, so a deduction from operating profit. Conversely an increase in payables means less cash has been paid out to payables meaning more money in the bank hence an addition to operating profit.

So to summarise: inflows = addition to operating profit; outflows = deduction from operating profit.

Hope that helps.

Best wishes
Steve

wannabebean

Thanks

Hello

Yes that helped.

I have worked it out thus:

Add a DECREASE to an asset
Add an INCREASE to a liability

Therefore, in it's simple format:

Profit from Ops for the year (before tax and interest)
Add Depreciation
Add a LOSS on the disposal of an NCA, PPE or Intangible Asset
Deduct Investment Income (Dividends received)
Add a DECREASE to an asset
Add an INCREASE to a liability

Then Minus tax (from previous years figure) and Interest payable for the period

Hope this is right! Although it does appear that I am deducting Dividends received in both the Reconcilation and then later in the SOCF in the Investing Activities section? Whereas Dividends Paid are simply deducted in the Financing Activities Section? Or should they be ADDED to the reconcilation?

Thanks