MICRO & SMALL BUSINESS

Cash Flow Statement: Definition, How to Create, Examples

What is a cash flow statement? How to make an example of a proper cash flow statement? Read more on the Mekari Journal Blog. Read to the end yes!

As a business person, you have to understand cash flow, not just an accountant.

A cash flow statement has a very important impact on your business.

With this financial report, you will know the condition of your company in a profit or loss condition.

Usually, a cash flow statement provides information about the amount of cash income and expenditure of the company in a certain period.

Understanding Cash Flow Statements ( Cash Flow)

The definition of a cash flow statement is a breakdown that shows the amount of income and expenses in a certain period.

Cash flow in business and family finance is slightly different. If the family finances the cash flow in question is the cash basis.

Meanwhile, in business finance, there are cash basis and accrual basis.

Usually, this report includes the amount of cash received.

Examples of components contained in the cash flow statement are such as cash investments and cash income, and the amount of cash issued by the company.

Purpose & Benefits of a Cash Flow Statement

The purpose of a cash flow statement is to present information about cash receipts and disbursements in an accounting period.

Besides being useful for the company, this report also has benefits for investors, creditors, and others.

For example, in the cash flow report generated by theMekari Jurnal application, you can find out many things.

With a cashflow report like the one in the Journal accounting application displayed above, you can assess the following:

The Entity’s Ability to Get Cash Flow

The cash flow statement is considered better than the actual data to see the company’s financial condition.

With this report, you can make predictions about an entity’s ability to generate future cash flows.

Cash Investment & Funding Transactions

The number of assets and liabilities may change due to certain factors.

There is an examination of investment and funding transactions, so you can find out the cause of the change in the two accounts.

The Entity’s Ability to Pay Dividends and Liabilities

With a cash flow statement, the company can determine the amount of cash to pay a number of obligations.

For example, payroll for employees, paying debts, and paying dividends (distributing profits to shareholders).

In addition, with this report, investors can see an overview of the cash flow in your company’s business activities.

Description of the Difference between Net Profit & Net Cash Angka

Information on net income is needed by parties who use financial statements.

With the net profit data obtained by the company, it can be seen the extent of its success and failure.

Cash Flow Statement Components

There are 3 components in the cash flow statement, here are some examples of the components contained in it:

Cash Flow from Operating Activities

Cash flow from operating activities is cash flow that comes from transactions originating from the activity itself.

Usually, this transaction is in the form of company income or expenses.

Some examples of cash flows from operating activities are transactions that include receiving money from consumers, paying debts, employee salaries, paying taxes, and so on.

Cash Flow from Investing Activities

Cash flow from investing activities is cash flow in the form of income or expenditure.

Generally, these cash flows that affect investments in non-current assets are cash flows from investing activities.

This investment activity is related to the sale or purchase of company assets.

For example, transactions that include the sale and purchase of fixed assets such as equipment and buildings.

Cash Flow from Funding Activities

Usually, the cash flows from these financing activities come from transactions that affect the company’s debt and equity.

These are generally transactions that involve the issuance or retirement of equity and debt securities.

Examples are the sale of bonds, payment of dividends, issuance of shares, and repayment of credit from banks.

How to Create & Sample Cash Flow Statement

There are 2 (two) methods or ways to make a cash flow reportwhich are as follows.

How to Create & Sample Cash Flow Statements with the Indirect Method

In the indirect cash flow statement method, this report is prepared with 3 (three) elements.

First, the cash element from business activities is placed at the top.

After that, the elements of cash flow originate from investing activities, and cash flows from financing activities.

To create a cash report, there are two sources of data needed, namely:

  • Income statement for the current period
  • Period balance of the current period with the balance of the previous period

For more details, the following is an example of the steps for making a cash flow statement for 2019 using the indirect method.

Step 1: 2019 Income Statement Data

Take a look at the following sample income statement for 2019 from PT Sukses Berkarya Bersama

 

The Net Change column shows activities for 1 year. There is a difference between the 2017 balance sheet and the 2016 balance sheet.

  • Asset Group

If the number in the  Net Change column is positive (not minus), then the cash is disbursed, while if it is minus, there is cash receipts.

  • passive group

If the number in the  Net Change column is positive (not minus) then there is a cash receipt, and if it is minus, there is a cash disbursement.

Step 4: Doing the Compilation

Based on the income statement and balance sheet comparison for 2018 and 2019, then you are ready to prepare a cash flow report.

As it is known that making a cash flow statement has three components.

Cash Flow from Business Activities ( Operating Activities )

Based on the 2019 profit and loss data, the company made a profit of Rp. 19,000,000.

The following is an example of calculating cash flow from business operations and how to make the report.

Based on the example above, a deduction value of IDR 7,000,000 is obtained.

Cash Flow from Investing Activities

Cash flow increases due to a decrease in the value of fixed assets, on the contrary, cash flow decreases due to an increase in fixed assets.

If you look at the example above, it is found that the result is a reduced cash flow of Rp. 6,000,000.

Cash Flow from Funding Activities

Getting the value of financing activities, it can be done by moving the numbers in the Net Change column from the Long-Term Liability and Equity group section.

For the positive value, leave it alone and for the negative value, let it remain negative.

Then adding up all the values, in the example report above, additional cash of IDR 9,000,000 is obtained.

Total Cash Activities (Total Kegiatan Kas)

The total cash activity is obtained from the calculation of the total value [Operating Activities + Investing Activities + Financing Activities], in the example report above, the result of a decrease in cash is Rp. 4,000,000.

Cash Begining Balance

The initial cash balance can be taken from the balance sheet in the previous year, in this example, the value is Rp. 8,000,000.

Expected Cash Ending Balance

The cash balance should be obtained from the sum of the total cash activities with the initial cash balance on the 2018 Balance Sheet.

Based on the example, we get a calculation of IDR 8,000,000 (2018 balance cash) minus IDR 4,000,000 (decrease in cash), so we get a result of IDR 4,000,000

Actual Cash Ending Balance

The final balance in reality can be obtained from the current Balance Sheet, namely the 2017 Balance Sheet. In this example, the value is IDR 4,000,000.

Variance (Difference)

If the result of the calculation of the cash balance and the final balance is 0 (zero), then it has been completed.

PT Success Working Together
Cash flow statement
2017
A Cash Flow from Operating Activities (7,000,000)
B Cash Flow from Investing Activities (6,000,000)
C Cash Flow from Funding Activities 9,000,000
D Total Cash Activity (A+B+C) (4,000,000)
E Beginning Cash Balance (From 2016 Balance Sheet) 8,000,000
F Cash Balance Should (E+D) 4,000,000
G Final Balance Reality (From 2017 Balance Sheet) 4,000,000
H Difference (FG) 0

How to Make & Sample Cash Flow Statement with Direct Method

In the direct method cash flow statement, the preparation is based on the cash book/bank.

To use this method, you must report groups of cash receipts and disbursements from the company’s operations.

After that, proceed with investment and financing activities.

How to Make a Cash Flow Statement with Mekari Journal

Thus a discussion of the meaning, examples, and how to make a cash flow report for a company.

If you think the steps above are quite complicated, you can try using Mekari Jurnal’s online accounting software.

By using the Journal, you don’t have to bother following the steps above to get a cash flow report for your company.

By using the features of the Journal, you can choose a direct or indirect method of making cash flow reports from the Journal application.

To get a cash flow statement using the direct method in the Journal, you can follow these steps:

1. Click the Reports menu. On the Business Overview tab, click Cash Flow.

Well, above is what is meant by a cash flow report, understanding, how to make, an example of a cash flow report is the following on the Journal By Mekari blog.

Check out other features of journal accounting applications such as the feature of making financial books, and the easy-to-use inventory application feature.

Hopefully, this information can be useful for those of you who need it, and please share it on social media.

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