In Financial Statements, the Cash Flow statement is calculated using the Indirect method. This might be a different approach for you, if you are familiar with using the Direct method. The Indirect method takes all the movements in the Profit and Loss statement and Balance Sheet related to the relevant Cash Flow groups. This calculation is straight forward for Cash Received (Sales less movements in Accounts Receivable). However, the calculation is more complex for other accounts, such as Accounts Payable, which relates to multiple items in the Profit and Loss statement, such as freight, legal fees, advertising, and so on.
Get familiar with the layout and contents
Following the indirect method, the Cash Flow statement contains the following items:
Groups | Operating | Displays the business trading activity. The relevant Profit and Loss accounts are displayed along with movements in working capital balance sheet accounts. |
|---|---|---|
Investing | Displays the investing activity of the business, such as CAPEX. | |
Financing | Displays the financing activity of the business, such as the extension or repayment of loans. | |
Calculation row | The sum of the above three groups to calculate the net cash movement for the period. | |
Cash balance rows | There are two Balance rows, one for the cash at the start and the other for the cash at the end of the period. You can move these Balance rows around, but you cannot delete them. |
You can add more groups, reorder and rename the existing groups. See example below.
Manage the Cash Flow accounts
For completeness, all General Ledger accounts in the Cash Flow statement must be mapped to a Cash Flow group. The mapping is done for you but you should check it to ensure it is correct. You might need to make some changes. See Map accounts to a group.
You must specify the General Ledger accounts that are cash balances. These accounts are not mapped. The value of these accounts display in the cash balance rows in the statement. See Set the bank account in a Cash Flow statement.
When all the accounts are mapped correctly your Cash Flow statement should balance.
Example: Add a group for Accounts Receivable
Suppose you want more visibility on how your Accounts Receivable are affecting your cashflow over the period. You can add a group for Accounts Receivable in your Cash Flow statement.
The steps below are a summary of steps from multiple pages. See the related pages (links on the right) for more detailed information.
In the Statements window, click the Cash Flow statement (or if preferred, clone the Cash Flow statement and then click that to open it).
In the statement setup window, add a group for Accounts Receivable and drag it up to where you want it to be positioned, for example, just below the Operating group.
Edit the existing calculation to include reference the new group, then click Save.
Click the Accounts tab, then map the applicable accounts to the new group.
Click Save > Close > Yes to rebuild the database.
On this page
Related pages
Academy video