How to Prepare a Statement of Cash Flows

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on August 27, 2021

We will first prepare a cash flow statement of a sole trader’s business, as this will be easier than of a limited company.

Example:

John Bros. started a business on 1st January 2017 with cash $2,50,000. They purchased furniture for cash $35,000. They submitted the following information on 31st December 2017.

  • Purchased merchandise for $85,000 of which $75,000 was paid during the year.
  • Salaries amounting to $72,000 of which $6,000 was unpaid at the end of the year.
  • Total sales $2,45,000 including $35,000 receivable at the end of the year.
  • Rent paid for shop $60,000.
  • Commission received $9,000.

Required: Prepare cash flow statement for the year 2017.

Solution:

Statement of cash flows
Explanatory note on the use of brackets: In accounting, it is customary to show a figure in brackets if it is a minus figure. This would be deducted from the other figures to arrive at the total of the column. Brackets are seen very frequently in cash flow statements.

1 thought on “How to Prepare a Statement of Cash Flows”

Leave a Comment