Overview of the

formal Statement
of Cash Flows
 Remember…
cash is cash is cash.
 Let’s remind ourselves of the
intertwined nature of the three
core statements.
 Statement of Closing cash Statement of
Financial Position figure for the Financial Position
period

Opening Closing
balances balances

Profit or loss for

the period
 And let’s also remind
ourselves of the nature of
cash flows…
Opening Statement Closing Statement
of Financial Position Cash flows in of Financial Position
−
Cash flows out
=
Current assets Net cash flows Current assets
Cash at bank + Cash at bank
Opening balance
=
Closing balance
Cash balances…
Statement of
Financial Position

‘Cash balances’
can be positive
and/or negative
Cash balances…
Statement of
Financial Position

Positive
‘cash balances’ … Current assets
Cash at bank
Cash balances…
Statement of
Financial Position

Negative
‘cash balances’ … Current liabilities
Short-term Also known as
borrowings overdrafts
Cash balances…
Opening Statement Closing Statement
of Financial of Financial
Position Position

Current assets Current liabilities

Cash at bank Overdraft

Overall decrease
in cash
Cash balances…
Opening Statement Closing Statement
of Financial of Financial
Position Position

Current assets Current assets

Cash at bank Cash at bank
Overall
increase/decrease
in cash
Cash balances…
Opening Statement Closing Statement
of Financial of Financial
Position Position

Current liabilities Current assets

Overdraft Cash at bank
Overall increase
in cash
Cash balances…
Opening Statement Closing Statement
of Financial of Financial
Position Position

Current liabilities Current liabilities

Overdraft Overdraft
Overall
increase/decrease
in cash
Cash balances…

Statement of
‘Cash balances’ Financial Position
can be positive
and/or negative Current assets
even within the Cash at bank
same Statement
Current liabilities
of Financial Short-term
Position borrowings
The formal Statement of Cash
Flows (SoCF) is a
reorganisation of the various
cash-related items,
categorised into more
meaningful groups.
Meaningful groups which link
to strategic challenges and
choices that have been made
during a financial period.
From simple to more meaningful…
Operating
activities
Cash flows in
-
Cash flows out
Net cash flow
= +
Investing
Net cash flows activities
Opening balance
=
+
Closing balance
Opening balance
=
Closing balance Financing
activities
This can aid our interpretation
of relative success or failure
in the quest to manage cash
effectively for strategic
advantage.