Introduction
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You are the financial accountant of the major bakery chain Bread Pitt. This is a major Fortune 500 company located across the country. Recently, the business has faced difficulty in their cash flow. The business has recently suffered from having low funds and increases in debt payments. This has resulted in the business not having enough incoming money to cover their outgoing money. As the businesses financial accountant, you must now prepare a detailed record of how the business reached this position by using a tool called a cash flow statement.
Next > Click on the Task tab located above |
Task
In order to first understand how to create a cash flow statement, it is important to first dissect the cash flow statement to understand its components.
Next > Click on the Process tab located above
Process
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Task 1
Create a vocabulary of keywords related to the Cash flow statement. Do this in your exercise book.
- Cashflow Statement
- Cash Inflows
- Cash Outflows
- Net Cashflows
- Operating cash flows
- Investing cash flows
- Financing cash flows
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Task 2
Draw the following table into your book. Next, apply your understanding of the (cash inflow/cash outflow) definition above to the following task:
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Item |
Classification |
Item |
Classification |
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Sale of Assets |
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Debtor Repayments |
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Payments for expenses |
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Stock purchases |
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Capital purchases |
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Interest received on investments |
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Repayments to owners |
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Payments to Creditors |
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Dividend Repayments |
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Sale of machinery |
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Electricity |
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Income tax |
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Salaries |
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Sale of stock |
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Task 3
Now, do the same for the remaining definitions (Operating, Investing, Financing cash flow definitions)
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Item |
Classification |
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Dividend Repayment |
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Stock Purchases |
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Salary Expenses |
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Interest revenue |
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Sales of Investments |
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Electricity |
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Sale of Machinery |
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Task 4
Show your completed work to your teacher. If your answers are correct, the teacher will issue you with a worksheet that requires your newly acquired knowledge to complete.
Evaluation
Evaluation
By the end of the activity, you should now be able to construct and use a cash flow statement.
CASH FLOW STATEMENT
- Complete the following cash flow statement questions
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JAN |
FEB |
MARCH |
APRIL |
MAY |
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Opening Balance ($) |
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3,000 |
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Cash Receipts |
12,000 |
9,000 |
15,000 |
13,000 |
12,000 |
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Cash Payments |
11,000 |
11,000 |
8,000 |
10,000 |
8,000 |
- What is the opening cash balance in June? ______________________________________
- In which months is there a positive cash flow? ___________________________________
- In which months is there a negative cash flow? ____________________________________
- Outline some possible strategies the business can adopt to assist in managing their funds better
Teacher Page
This Webquest was made for Year 11 preliminary business studies students (stage 6 Australian educational outcomes) for the unit of work financial accounting.
For the year 11 level, the webquest is made for students to be introduced to one of the 3 financial statements students study when undertaking the business studies course.
At the year 12 level, much more evaluation and application of the cash flow statement is required and a more in depth analysis of its usage as a monitoring and controlling tool is made when undertaking this study.