2. OCR Level 3 Cambridge Technicals in Business
Lesson Element
Unit 4: Business Accounting
Cash Flow Forecast

3. Cash Flow Forecast
The cash flow records money flowing in and out of the business.
Income is recorded
on the date the money
was received
Expenditure is recorded on the date the payment was made

4. Definitions
Income - money that has come into the business and includes:
Initial capital (money) to start the business
Money received from sale of products or services offered
Money received from loans
Money received from the sale of fixed assets

5. Definitions
Expenditure – any money that is spent during the normal activities of the business. It can include:
Payment for expenses, eg petrol, wages
Payment for purchases (stock for resale)
Purchase of fixed assets

6. The cash flow forecast is broken down into segments of time:
Layout
The cash flow forecast is broken down into segments of time:
Weeks
Months
Days

7. Layout The first section records the money coming into the business.
heading
money gained through the sale of goods or services
money received from a third party – will require repayment plus interest
total flow of income into the business

8. This is totalled at the end of the time segment.
Layout
The second section records the expenditure made by the business during each segment of time.
This is totalled at the end of the time segment.

9. Layout All figures in £ January February Income Sales 600 1,000 Loan
Total Income
1,600
Expenditure
Purchases
800
500
Wages
400
Total Expenditure
1,200
900

10. Layout
The final section is where the calculations are made. The business needs to see if there has been a greater outflow than inflow of money.
Opening balance – the money that was available within the bank/cash account at the beginning of the time period
Closing balance is opening balance add total inflow/outflow
Inflow/outflow is total income minus total expenditure

11. Layout Using the example above:
January
February
Opening Balance
300
700
Total income
1600
Total expenditure
1200
Inflow/outflow
400
Closing Balance
Using the example above:
The opening balance in January was £300
Total income £1,600 – Total expenditure £1,200 = £400
Closing balance was opening balance + inflow/outflow = £700
The closing balance of January is the opening balance of February

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