How to Prepare a Statement of Cash Flows
We will first prepare a cash flow statement of a sole trader’s business, as this will be easier than of a limited company.
- 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.
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.