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Cash Flow Statements

Cash Flow Statement

Historically, in the UK, financial statements comprised of only balance sheets and

profit and loss accounts. When in the 1970’s inflation started to effect the understanding of accounts another statement – the cash flow statement was introduced. This statement represents the liquidity of the business.

Cash flow statements help users of financial statements to understand performance

and position better by disclosing the different cash inflows and outflows.

The UK Financial Reporting Standards require entities to report their cash flows under the following headings:-

  • • cash inflow or outflow to the bank as a result of changes in stocks, debtors and creditors
  • • Net cash inflow or outflow as a result of such things as dividends and interest paid or received during the period of account.
  • • Net cash inflow or o taxation [tax paid];
  • • Net cash inflow or outflow from capital items calculated by adding capital expenditure minus proceeds from the sale of capital assets
  • • Net cash inflow from acquisitions and disposa of separate businesses;
  • equity dividends paid
  • financing [proceeds on the issue of shares and loan notes, redemption of

certain shares and loan notes];