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spent. You would include payments or received funds in the form of cash, check credit card
payments, debit card payments, electronic transfers, or any other means of payment. For
tracking cash-flow, this is the easier of the two accounting systems. Accrual-based accounting
With accrual-based accounting, you record all transactions when they occur, even if no cash
has changed hands. For example, if you were to sell something to a customer on store credit,
you would give the customer the product immediately, but you wouldn’t receive payment for
the item until they make it at a later date. This system is not good for tracking actual cash flow.
For example, you could make thousands of dollars of sales so that you have a great deal of
money showing as revenue on your Income Statement, but you could have zero dollars in the
bank! If your organization uses accrual-based accounting, creating the Cash Flow Statement is
more complicated. It will require that you look at your Net Income and determine what
portion of it was actually cash. Then you will have to add and sub out the changes in accounts
that do not have an impact on cash, such as depreciation. Depreciation
Considered a non-cash expense, depreciation is the reduction in value of an asset that occurs
over time. Depreciation could be due from use, wearh and taear, age, or irrelevance. For
example, the computer you buy today will not be worth what you paid for it in five years.
Instead, it will gradually depreciate until it either reaches the end of its life or it becomes
completely useless for the operation of the business. Depreciation has to be included in
financial statements as a cost in order to represent the true value of the organization’s assets. Download free ebooks at bookboon.com
36 Cash Flow Statement Managing Budgets 6.2 Cash Flow Categories
The Cash Flow Statement typically analyzes cash flow in three different categories: Operations Financing Investing Figure 6 demonstrates the main sources of incoming cash and the common us...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.
- Fall '13